中國民生銀行股份有限公司 China Minsheng

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

中國民生銀行股份有限公司 CHINA MINSHENG BANKING CORP., LTD. (a joint stock company incorporated in the People’s Republic of China with limited liability) (Stock Code: 01988) (USD Preference Shares Stock Code: 04609) Results Announcement For the Year Ended 31 December 2018 The Board of Directors (the “Board”) of China Minsheng Banking Corp., Ltd. (the “Company”) hereby announces the audited results of the Company and its subsidiaries for the year ended 31 December 2018. This announcement, containing the full text of the 2018 Annual Report of the Company, complies with the relevant requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) in relation to information to accompany preliminary announcements of annual results. Publication of Annual Results and Annual Report

This results announcement will be published on the HKEXnews website of Hong Kong Stock Exchange (www.hkexnews.hk) and the Company’s website (www.cmbc.com.cn).

The 2018 Annual Report of the Company will be dispatched to holders of H shares of the Company and published on the websites of the Company and Hong Kong Stock Exchange in due course. Profit Distribution

On 29 March 2019, the 14th meeting of the seventh session of the Board of the Company approved the profit distribution plan to declare to holders of A shares and H shares whose names appear on the registers as at the record dates as indicated in the notice of 2018 annual general meeting of the Company to be published by the Company in due course, a cash dividend of RMB3.45 (tax inclusive) for every 10 shares being held. The above profit distribution plan is subject to the approval of the 2018 annual general meeting of the Company. The cash dividend is expected to be paid to holders of H shares on 26 July 2019. Notice of 2018 annual general meeting of the Company will announce the date of the 2018 annual general meeting of the Company and details of its book closure, as well as the arrangement of book closure for profit distribution.

By Order of the Board CHINA MINSHENG BANKING CORP., LTD. Hong Qi Chairman

Beijing, PRC 29 March 2019

As at the date of this announcement, the executive directors of the Company are Mr. Hong Qi and Mr. Zheng Wanchun; the non- executive directors are Mr. Zhang Hongwei, Mr. Lu Zhiqiang, Mr. Liu Yonghao, Mr. Shi Yuzhu, Mr. Wu Di, Mr. Song Chunfeng and Mr. Weng Zhenjie; and the independent non-executive directors are Mr. Liu Jipeng, Mr. Li Hancheng, Mr. Xie Zhichun, Mr. Peng Xuefeng, Mr. Liu Ningyu and Mr. Tian Suning. Important Notice

The Board, the Board of Supervisors, and the Directors, Supervisors and Senior Management of the Company warrant that there are no misstatements, misleading representations or material omissions in this report, and shall assume several and joint liability for the truthfulness, accuracy and completeness of its contents.

This Annual Report was considered and approved on 29 March 2019 at the 14th meeting of the seventh session of the Board of the Company. Of the 15 Directors who were entitled to attend the meeting, seven Directors attended the meeting in person, and eight Directors, being the Vice Chairmen Zhang Hongwei, Lu Zhiqiang and Liu Yonghao as well as the Directors Shi Yuzhu, Wu Di, Liu Jipeng, Xie Zhichun and Tian Suning, attended the meeting by teleconference. Of the eight Supervisors who were entitled to attend the meeting as non-voting delegates, eight Supervisors attended the meeting as non-voting delegates.

The profit distribution plan for 2018 was approved by the Board, pursuant to which a cash dividend of RMB3.45 (tax inclusive) will be distributed to all shareholders for every 10 shares being held on the record dates. The above profit distribution plan is subject to approval by the shareholders’ general meeting of the Company.

For the purpose of this Annual Report, China Minsheng Banking Corp., Ltd. shall be referred to as the “Company”, the “Bank”, “China Minsheng Bank” or “Minsheng Bank”, whereas China Minsheng Banking Corp., Ltd. and its subsidiaries together shall be referred to as the “Group”.

The financial data and indicators contained in this Annual Report are prepared according to the rules of the International Financial Reporting Standards (“IFRSs”). Unless otherwise specified, all amounts are the consolidated data of the Group and denominated in RMB.

KPMG Huazhen LLP and KPMG Certified Public Accountants, auditors of the Company, have audited the financial reports of 2018 prepared in accordance with the Chinese Accounting Standards (“CAS”) and the IFRSs, respectively, and issued standard and unqualified auditors’ reports.

Board of Directors China Minsheng Banking Corp., Ltd.

Hong Qi (Chairman), Zheng Wanchun (President), Bai Dan (Senior Management responsible for finance and accounting) and Li Wen (person in charge of the accounting department) warrant the truthfulness, accuracy and completeness of the financial reports included in this Annual Report.

1 Contents

Important Notice 1

Chapter 1 Bank Profile 19

Chapter 2 Summary of Accounting Data and Financial Indicators 21

Chapter 3 Discussion and Analysis on Business Operation 24

Chapter 4 Changes in Share Capital and Information on Shareholders 96

Chapter 5 Directors, Supervisors, Senior Management and Employees 122

Chapter 6 Corporate Governance 154

Chapter 7 Report of the Board of Directors 209

Chapter 8 Report of the Board of Supervisors 217

Chapter 9 Major Events 224

Chapter 10 Financial Reports 237

2 Material Risks Warning

The Company has no foreseeable material risks. For potential risks, please refer to the section headed “XI. Prospects and Measures — (III) Potential risks” under “Chapter 3 Discussion and Analysis on Business Operation” of this report.

3 Definitions

In this report, unless the context otherwise requires, the following terms shall have the meanings set out below.

“ACFIC” All-China Federation of Industry and Commerce (中華全國工商業聯合會 )

“Articles of Association” the Articles of Association of China Minsheng Banking Corp., Ltd.

“Bank” or “Company” or China Minsheng Banking Corp., Ltd. “China Minsheng Bank” or “Minsheng Bank”

“Board” Board of Directors of the Company

“Board of Supervisors” Board of Supervisors of the Company

“CBIRC” China Banking and Insurance Regulatory Commission

“CMBC International” CMBC International Holdings Limited

“CPPCC” The National Committee of the Chinese People’s Political Consultative Conference (中國人民政治協商會議全國委員會 )

“CSRC” China Securities Regulatory Commission

“Director” Director of the Company

“Former CBRC” Former China Banking Regulatory Commission

“Former CIRC” Former China Insurance Regulatory Commission

“Group” the Company and its subsidiaries

“Hong Kong Listing Rules” the Rules Governing the Listing of Securities on SEHK

4 “Minsheng Financial Leasing” Minsheng Financial Leasing Co., Ltd.

“Minsheng Royal Asset Management” Minsheng Royal Asset Management Co., Ltd.

“Minsheng Royal Fund” Minsheng Royal Fund Management Co., Ltd.

“Model Code” Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Hong Kong Listing Rules

“PBOC” People’s Bank of China

“Phoenix Project” (鳳凰計劃) a comprehensive customer-oriented project for transformation for growth model and reform of corporate governance of the Company in response to the liberalisation of interest rate and other changes in the external environment

“Reporting Period” the period from 1 January 2018 to 31 December 2018

“SBU(s)” Strategic business unit(s)

“SEHK” The Stock Exchange of Hong Kong Limited

“Senior Management” senior management of the Company

“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“SSE” Shanghai Stock Exchange

“Supervisor(s)” Supervisor(s) of the Company

“SZSE” Shenzhen Stock Exchange

5 Message from the Chairman

2018 marked the beginning of implementation of the spirit of the 19th CPC National Congress. According to the Central Economic Work Conference, the macro control targets for 2018 have been generally achieved. Initial progress was made in the material risks prevention and mitigation, targeted poverty alleviation and pollution prevention and control. Sustainable and healthy economic growth and stable social order were maintained with the deepening supply-side structural reform, higher level of reform and opening-up, proper settlement of China-United States trade friction as well as improvements in people’s livelihood. These achievements took China a step closer to building a moderately prosperous society.

Despite these hard-won achievements, China experienced numerous new economic challenges in 2018. Domestically, the economic growth rate of China slowed down from 6.8% in 2017 to 6.6% in 2018. Higher volatility took hold of the stock markets, bond markets, foreign exchange markets and other financial markets. Non-state-owned enterprises (NSOEs) faced greater operation pressure, financing difficulties and liquidity crisis. Internationally, the escalating China-United States trade friction imposed significant impacts on the production and operation of import and export trading enterprises and export-oriented enterprises. Dramatic changes in economic and market conditions put certain industries and many NSOEs in difficulty. Coupled with the rapid development of fintech enterprises and the rising market participation of internet giants in the financial sector, the banking industry was under severe pressure in terms of performance, operation, risk and competition.

China Minsheng Bank is deeply aware that, in the face of macro-economic changes, financial market fluctuation, information technology reform, intensified interbank competition and cross- industry competition, not only will the traditional operating philosophies, business models and technology systems of banks be challenged, but they will also be changed eventually. Only through systematic reform and transformation can banks turn challenges into opportunities to rebuild competitiveness, regain growth momentum and maximise market value. As at the end of 2017, based on the core achievements of the Phoenix Project and with reference to international advanced practice, the Board of China Minsheng Bank considered and approved the Scheme for Reform and Transformation and the Three-year Development Plan 《改革轉型暨三年發展規( 劃方案》), which specified the three major strategic positionings of becoming “a bank for the NSOEs, a fintech-based bank and a bank of comprehensive services”. Reform and transformation blueprints for business and management were formulated as the basis for developing corresponding organisation system, supervision and inspection mechanism as well as appraisal mechanisms so as to eventually realise the expected goals of reform and transformation.

In 2018, the overall operation and management of Minsheng Bank was carried out smoothly with strategic positionings and reform and transformation as the focus. Remarkable results have been achieved with stronger operation characteristics and more competitive edges.

In 2018, operating income of the Group exceeded RMB150 billion, amounting to RMB154.161 billion. Net profit attributable to the Company exceeded RMB50 billion, amounting to RMB50.327 billion.

6 Along with the breakthroughs made in operating results, the three major strategies of Minsheng Bank were effectively implemented:

To become “a bank for the NSOEs”: in 2018, Minsheng Bank extended a total of RMB1.37 trillion loans to NSOEs, accounting for 66.74% of total corporate loans (including discounted bills). As at the end of 2018, the total loans to NSOEs accounted for 55% of total corporate loans. Based on its 23 years of experience in serving NSOEs since its establishment, as well as the operation characteristics and development trends of NSOEs in the new era, Minsheng Bank formulated a comprehensive financial service plan for NSOEs: in line with its NSOE business strategy, Minsheng Bank focused on four major NSOE customer groups, namely strategic, niche, emerging and fundamental NSOEs, and provided classified services accordingly. In respect of products and services, Minsheng Bank refined its five major product systems, namely scenarised transaction banking, customised investment banking , personalised entrepreneur services, convenient online banking and integrated wealth management while developing a featured service model. According to the requirements of the central government and arrangements of regulatory authorities, Minsheng Bank improved the overall quality, efficiency and effectiveness of its financial services for NSOEs. The strategy of becoming “a bank for the NSOEs” significantly enhanced the competitiveness of corporate banking of Minsheng Bank. In 2018, the interest rate of new RMB corporate loans of Minsheng Bank continued to rank among top of comparable joint stock banks. The annual growth of both deposits denominated in RMB and foreign currencies and RMB corporate deposits ranked second among all joint-stock banks. As at the end of 2018, the total number of corporate customers and its growth ranked first and second among all joint-stock banks, respectively.

Small and micro enterprises accounted for the majority of NSOEs. Financial services for small and micro enterprises have always been the golden brand of Minsheng Bank. In 2018, after years of customer restructuring and business model upgrading, small business finance of Minsheng Bank resumed its peak level. Total loans to small and micro enterprises amounted to RMB471,405 million in 2018. As at the end of 2018, the total outstanding balance of loans to small and micro enterprises amounted to RMB406,938 million, representing an increase of 13.31% as compared with the end of the previous year and accounting for 13.38% of total outstanding balance of loans of the Bank. The deposits from small and micro enterprises amounted to RMB209,000 million, representing an increase of 11.4% as compared with the end of the previous year. In 2018, Minsheng Bank accelerated the implementation of the Small Business Model 3.0. Leveraging on its data, tools and system platforms, with customer group segmentation as the core, the Bank stepped up its technology support for the transformation of its small business finance. Greater efforts were made to improve the Bank’s differentiated and refined customer services, comprehensive risk management and professional capabilities of its service teams in a bid to strengthen the core competitiveness of its small business finance. The upgrading of small business finance model significantly improved asset quality. Since 2016, Minsheng Bank has recorded non-performing loan (NPL) ratio and overdue ratio of new loans to small and micro enterprises at 0.19% and 0.42%, respectively.

7 To become “a fintech-based bank”: Minsheng Bank was committed to fintech development dually driven by “data + technology”. As the first bank offering direct bank in China, the direct bank of the Bank actively supported the implementation of fintech strategies. The Bank set up the first “4 Clouds + Open-end + Linker (4朵雲+開放式+鏈接器)” BBC open-ended integrated financial cloud service platform in China with the application of DLT system as the core. The ISV open-end banking finance was adopted and has been upgraded to version 3.0, serving almost 20 million customers. In 2018, Minsheng Bank introduced the new “Remote Banking 1.0 (遠程銀行1.0)” which provided all existing customers with remote video-aided services, improving the capabilities of the Bank’s customer service.

To become “a bank of comprehensive services”: In 2018, Minsheng Bank accelerated the diversification of its business layout and promoted cross-selling and coordination among all business segments, business units, Minsheng Bank and its subsidiaries. All these efforts were aimed to provide customers with comprehensive “finance + intelligence + business” financial services. The non-bank financial subsidiaries, namely Minsheng Financial Leasing, Minsheng Royal Fund and CMBC International, enjoyed healthy business development. The capital increase of CMBC International was approved by regulatory authorities. In 2018, according to new regulatory requirements and integrated operation trends, the Board of Minsheng Bank approved the resolutions on the establishment of asset management subsidiary and financial asset investment company, gradually building up an integrated service system.

In 2019, the central government has prioritised the prevention and mitigation of material risks among the three major challenges. It is suggested that structural deleveraging shall be carried out while abnormal fluctuations and instability shall be prevented. Risks arising from debts of local governments shall be properly managed in a steady, controllable, orderly and moderate manner. In view of the macro-economic conditions, in 2019, the banking industry of China will undertake missions and challenges in respect of preventing and mitigating risks, structural deleveraging, supporting the development of the real economy, strategic transformation and changing business models. The pressure on profit growth and risk control will be significant.

In response to changes in macro-economic conditions and challenges faced by banks, in 2019, the crucial year of reform and transformation, Minsheng Bank will focus on the following tasks based on the three major strategic positionings. To become “a bank for the NSOEs”, Minsheng Bank will implement the NSOE strategy with an emphasis on serving strategic and niche NSOEs. Minsheng Bank will continue to implement the Small Business Model 3.0, step up product innovation and risk control and further improve its comprehensive services. To become “a fintech-based bank”: Minsheng Bank will refine its strategies of fintech and new technology, allocate adequate resources and establish supporting systems and mechanisms. Efforts will be made to strengthen coordinated data management of business and technology, improve data quality and speed up platform development and upgrading and effective application of key platforms. Minsheng Bank will carry out independent operation of direct bank and significantly increase support from internet finance to online digitalised transformation. To become “a bank of comprehensive services”, Minsheng Bank will offer customer-centric comprehensive solutions along its value chain. Supporting system and mechanism for comprehensive services will be set up to continuously improve the “One Minsheng” coordination mechanism and the cross-selling system. In addition, supporting mechanisms such as coordination between risks and businesses, key talent development, resource allocation and appraisal coordination will also be improved.

8 In view of the current profound changes and reform in the macro-economy and the financial sector, it is the mission and true value of Minsheng Bank to strive to explore a new development path for the transformation and upgrading of the banking industry and for its own sustainable development as well. I firmly believe that so long as we are unswervingly committed to reform and transformation, our strategic transformation goals will be successfully achieved, and Minsheng Bank will become a revitalised benchmark bank with distinctive features, increased value and continuous innovation.

9 Message from the President

The year of 2018 marked the first year of implementing the spirit of the 19th CPC National Congress and was the 40th anniversary of the reform and opening-up of China. It is also the first year for China Minsheng Bank to launch its comprehensive reform and transformation. The economy remained stable in general but some changes were seen. The banking industry was increasingly competitive and various internal and external risk-related issues emerged during the year. Minsheng Bank focused on the supply-side structural reform in strict compliance with national policies. In addition to serving the real economy, the Company also exerted great efforts in the prevention of financial risks, implementation of comprehensive reform and transformation and high quality development. The Company achieved excellent operating results for the investors and the community.

1. Promoting high quality development driven by reform and transformation. Adhering to its strategic positioning of becoming “a bank for NSOEs, a fintech-based bank and a bank of comprehensive services”, the Company formulated the business strategies of “developing light- capital business, optimising liabilities, adjusting structure, restructuring, promoting synergy and maintaining high quality”. The Company carried out a significant structural reformation and achieved breakthrough with “four beams and eight pillars” nature and high quality development. In 2018, Minsheng Bank achieved breakthrough in four aspects for the first time, namely, net profit attributable to shareholders of the parent Company and operating income of the Company amounted to more than RMB50,000 million and RMB150,000 million, respectively for the first time, exceeding their historical records before the replacement of business tax with value-added tax. Both daily average domestic and foreign deposits and the total loans of the bank as at the end of the year hit their respective records of more than RMB3 trillion for the first time. In addition, the return on weighted average equity (ROAE) and average return on assets (ROA) of the Group were 12.94% and 0.85%, respectively. The earnings per share and net asset per share of the Group amounted to RMB1.14 and RMB9.37, respectively. New drivers for business growth were generated through reform and transformation. The direct bank of the Company has ranked top among the peers for four consecutive years. The Company has developed “digital finance” business for small and micro enterprises to improve its comprehensive services of financing and wealth management and provide small and micro enterprises with more convenient, exclusive and comprehensive financial services. Through optimisation of the operation of investment banking business, an integrated investment banking product system comprising equity, debts, investment, loan and financial consultation was improved for customised investment banking services. The digital marketing system of credit card business was optimised and the cross-selling capabilities of the Company were strengthened to meet the diversified financing needs of customers. A comprehensive supply chain financing platform was established with enriched variety of products and services to provide financing solutions for upstream and downstream enterprises. The new capital requirements were complied with in asset management. By introducing innovative business and services, the Company has proactively reformed to offer net worth products. Meanwhile, Minsheng Bank continued to increase its investment in fintech, so as to improve its research and development capabilities and efficiency. Its domestically leading self-developed distributed core system using DLT reduced cost and enhanced efficiency significantly. Several major projects were launched, including new supply-chain finance, mobile banking 4.0, 24-hour remote banking and corporate direct bank. The Bank has endeavoured to make concrete efforts to develop fintech business.

10 2. Strengthening unique position by providing services to NSOEs and small and micro enterprises. Minsheng Bank regarded the implementation of the proposition of the central government at the Symposium on NSOEs as its major political mission and precious opportunity. Based on its operating strategies and conditions, the Company actively supported the development of NSOEs and small and micro enterprises. On one hand, it deepened the strategy of cooperating with NSOEs and extended the service chains. With professional, passionate, effective and down-to-earth services, the Company successfully expanded the coverage of its services to large, medium and small and micro enterprises. For those in good condition, the Company provided more credit facilities and integrated finance services, and for those in temporary difficulties, the Company provided help and assistance. In 2018, total loans to NSOEs amounted to RMB1.37 trillion, accounting for 66.74% of total corporate loans (including discounted bills). On the other hand, the Company adopted the national inclusive finance strategy. With its 10 years of experience of small business finance, it played an active role in changing the status of marginalisation of small and micro enterprises in modern finance industry. With “small drips (小滴灌)” of the Company’s sophisticated services reaped “a good harvest (大豐收)” in small business finance; the Company’s “micro-environment (小環境)” cultivated a “macro- environment (大氣候)” of the development of small and micro enterprises; the Company’s down- to-earth “small business (小買賣)” won “great popularity (大反響)” in the society. In 2018, the aggregated amount of loans to small and micro enterprises amounted to RMB471,405 million, and loans to small and micro enterprises as at the end of the year amounted to RMB406,938 million, representing an increase of 13.31% as compared with the end of the previous year, accounting for 13.38% of total loans of the Company. Total loans to small and micro enterprises and number of customers maintained faster growth.

3. Maintaining steady and healthy asset quality to prevent financial risks. Facing the challenges from various risks and risk events in the banking industry, Minsheng Bank properly performed its responsibilities of risk management by transforming to active risk management. The Bank continuously refined its long-term comprehensive risk management mechanism, with clear division of responsibilities and accountability. With coordinated defense web consisting of internal control and compliance, risk taken approval, discipline supervision, legal advice and audit, the Bank maintained lawful operation and management. The law-abiding and strict bank governance were reinforced at all levels. The Bank put more attention and resources into collection and disposal of assets by setting up the Special Assets Department which is responsible for the management of non- performing assets. By strengthening the centralised collection and disposal of assets and putting more effort in disposal of non-performing assets, the development of business of the Bank has been safeguarded. The Bank implemented various measures to promote capital saving and strictly control the growth of risk assets, so as to significantly improve its risk resistance. As at the end of 2018, the NPL ratio of the Bank was 1.75%. The difference between NPLs and overdue loans of the Group continued to narrow. As at the end of the year (data of the Bank), the core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio of the Bank was 8.87%, 9.09% and 11.71%, respectively, which remained unchanged in general as compare with the beginning of the year. The liquidity coverage ratio and liquidity ratio of the Bank reached 121% and 51.64%, respectively. The liquidity of the Bank improved significantly.

11 4. Sincerely performing social responsibilities by focusing on targeted poverty alleviation. Minsheng Bank has constantly adhered to its mission of “From the People, For the People (為民而生、與民共生)” to bear in mind its core value of “Minsheng (well-being of the public)”. The Company implemented the national policy of “three main tasks (三大攻堅戰)”, and explored the rules for financial poverty alleviation. Based on the features of poverty-striken areas, the Company proactively commenced targeted poverty alleviation by putting efforts in cultivating and activating local productivity. A multi-level “six-in-one (六位一體)” system of poverty alleviation with broad coverage and strong penetration were formed, with education as the basis, health care as the focus, equity interests as the breakthrough, financial services as the support, skill training as the approach, and e-commerce as a testing move. In 2018, the total loans granted for targeted poverty alleviation amounted to RMB6,752 million, representing an increase of RMB2,610 million as compared with the corresponding period of the previous year. As at the end of 2018, the loans granted for targeted poverty alleviation amounted to RMB3,096 million, representing an increase of RMB1,021 million as compared with the end of the previous year. Hua County in Henan Province, a target of poverty alleviation of Minsheng Bank, shook off poverty successfully. The Company’s targeted poverty alleviation was recognised by the central government, and had won the “Chinese Charity Award (中華慈善獎)” for five times, obtaining the “Outstanding Poverty Alleviation Case (優秀扶貧案例獎)” by the Leading Group Office of Poverty Alleviation and Development of the State Council for several times, ranked first in the “Social Responsibility Development Index of Top 100 NSOEs (中國民營企業社會責任100強)” by the Chinese Academy of Social Sciences obtaining and won the “Best Charity Contribution Award (最佳公益慈善貢獻獎)” by China Banking Association.

5. Continuously strengthening the corporate governance by adhering to the leadership of the Party. Minsheng Bank has adhered to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a new era. The Company has seriously learnt and implemented principles of the 19th CPC National Congress and reinforced “four concepts (四個意識)” and persisted in “four confidence (四個自信)” so as to comprehensively take forward the regulations regarding politics, mindset, organisation, conducts and probity of the Party. The Bank has emphasised the political construction of the Party in order to comprehensively practice law- abiding and strict corporate governance and combine unified leadership of the Party with refined corporate governance. The Bank continued to carry out anti-corruption measures and commenced inspections and stressed on accountability to rectify formalism, bureaucracy, hedonism and extravagance and foster a clean and honest business environment. The Bank insisted that the Party building should lead group building and strengthened the Party’s guidance on the work of the Labor Union, the Youth League and the Women’s Federation and other organisations, so that the political advantages of Party building works can be transformed into management achievements. In 2018, Minsheng Bank ranked 251st in the “Fortune Global 500” by Fortune and ranked 30th in the “Top 1000 World Banks” by The Banker, maintaining stable world influence and global competitiveness.

The above achievements are attributable to the supervision and management of regulatory authorities, the leadership and guidance of the Board, the dedication and hard-work of all of the staff, and most importantly, the continuous faith in and support of the customers and parties from various sectors of the community. On behalf of the CPC Party Committee and the management of Minsheng Bank, I would like to express my sincere gratitude to those who care about and support the development of China Minsheng Bank!

12 The Bank is taking on a new journey full of opportunities and challenges. In 2019. Minsheng Bank will focus on the three tasks of serving the real economy, preventing financial risks and deepening financial reform, and will stabilise employment, finance, foreign trade, foreign capital, investment and work expectations. The Bank will stick to its strategic positioning as “a bank for the NSOEs, a fintech-based bank and a bank of comprehensive services” and improve its three featured businesses of direct bank, small business finance and investment banking. The Bank will also continue to develop its three leading businesses of credit cards, supply chain finance and asset management and consolidate the five major businesses of corporate banking, retail banking, financial markets, internet finance and integrated services. The Bank will optimise the related management of risks, human resources, assets and liabilities and information technology. Those who are hard-working make progress. In 2019, Minsheng Bank will continue to work hard in reform and transformation to promote the Bank to a higher level, create greater value for the shareholders and celebrate the 70th anniversary of the founding of the PRC with more outstanding achievements!

13 Strategic Positioning, Reform and Transformation of the Company

I. Mission

In view of the macro economic situation with significant changes in economic development and economic structure and in response to the challenges arising from liberalisation of interest rates, emergence of financial technology, acceleration of financial disintermediation and increasingly stringent regulation, the Company optimised its management structure by further improving its corporate governance. In particular, the Company put efforts in accelerating transformation and renovation and providing innovative services modes and channels. The Company also enhanced its capability and strength to cope with challenges and serve the real economy. In addition, the Company strengthened business adjustment and transformation and focused on its development strategies, with an aim to become a bank for NSOEs, a fintech-based bank and a bank of comprehensive services, taking its sound and sustainable development to a new level.

II. Strategic Positioning and Targets

(I) Strategic positioning

The Company aims to become a bank for NSOEs, a fintech-based bank and a bank of comprehensive services.

(II) Strategic targets

As a customer-oriented bank, the Company targets to improve its quality and profitability and transform itself into a digitalised, light-capital and integrated benchmark bank, so as to further raise its corporate value.

III. Reform and Transformation

Commercial banks are facing a growing number of challenges when China’s banking industry entered into a new stage of development, including the slow-down in economic growth, further liberalisation of interest rates, easier access to financial market, opening-up of capital market and the rising of internet finance. Traditional extensive operation model can no longer accommodate with the market development. The management should be improved and refined in a professional manner in line with customer-centric operation philosophy. From the internal perspective, the Bank was under pressure posed by capital restriction, assets quality and operating cost, which requires the upgrading and optimisation of business model so as to rectify weak points of management and consolidate the foundation of development.

In order to take the initiatives in response to various internal and external challenges, the Bank promoted the transformation of the business development path and operation and management model of the Bank by launching the Phoenix Project in June 2015. Over two years by the end of 2017, 30 sub-projects under the Phoenix Project were successfully completed and desirable results were achieved as expected.

14 Based on the core achievements of the Phoenix Project and the Three-Year Development Plan, the Board of the Company considered and approved the Overall Implementation Scheme for Reform and Transformation and the Three-year Development Plan of China Minsheng Bank 《中國民生銀行改革轉型暨三年發展規劃整體實施方案》( ) (the “Implementation Scheme”) on 27 April 2018, targeting to develop the Company into a benchmark bank with distinctive features, increasing values and continuous innovation and to maximise its market value through reform and transformation in three years to improve the development quality and efficiency under the customer-centric principle in line with the three strategic positionings, namely a bank for the NSOEs, a fintech-based bank and a bank of comprehensive services.

During the Reporting Period, under the leadership of the Board and the operation management, the Implementation Plans were carried out orderly and remarkable results of transformation were achieved.

Firstly, the Company strives to develop into a bank for the NSOEs. In 2018, the Company focused on four major NSOE customer groups, namely strategic, niche, emerging and fundamental NSOE customers. A designated service model for NSOE customers has been developed. The Company further explored the implementation of its NSOE strategy by making breakthroughs in system establishment, human resources allocation, development model, product development, cooperation mechanism and online platforms, the results were significant. The Company has maintained a white name list of large-sized strategic NSOE customers and continuously improved its comprehensive solutions to facilitate the development and expansion of NSOEs by providing support in capital, credit, finance and technologies. The Company had developed solutions for six major industries for niche NSOE customers and established an advanced supply-chain financial service platform by creating the “Minsheng E Chain (民生E鏈)” brand. For small and medium NSOEs, by focusing on eight key industries and four major customer groups, the service efficiency of the Company has been greatly improved. The Small Business Model 3.0 was fully implemented and significant achievements were made in batch acquisition of customers, comprehensive development of customer groups, optimisation of the operating income structure as well as accelerated development of online banking business. In private banking sector, the synergy between corporate customers and individual customers as well as the establishment of private banking centers further facilitated the acquisition of entrepreneur-level private banking customers. For agency business and asset management, by concentrating on targeted customers, particularly the NSOE customers, the Company has noticeably expanded its customer base of strategic NSOEs for its financial markets business through product innovation and cross-selling.

Secondly, the Company strives to develop into a fintech-based bank. In 2018, dually supported by the two driving forces of “data and technology”, the Company actively carried out reform and transformation, promoted the development of digitalised and smart bank, established a large-scale big data platform and introduced advanced technologies in targeted marketing, innovated risk control and refined management. All these efforts have brought new driving force to the transformation of business model and delicacy management of the Company. Significant progress was made in the development of data-driven marketing management and control system, which further facilitated the innovative wealth management model. The Company took the lead in the sector to launch “Remote Banking 1.0” and

15 achieved full coverage of long distance video-aided service for all existing customers. The leading position in internet finance has been further consolidated with its direct bank brand and customer satisfaction ranking top among its peers. The internet finance provided significant support for the online transformation of various business segments. The Company continued to enhance the development of innovative technologies and allocate extra resources in new technologies to facilitate the reform and transformation. The Company was the owner to various new technologies with independent intellectual property rights, such as distributed core financial cloud platform (分佈式核心金融雲平台), big data platform and artificial intelligence service system. The Company has also joined the international blockchain alliances and has been engaged to formulate blockchain technology standards applicable to the banking industry together with the regulatory authorities.

Thirdly, the Company strives to develop into a bank of comprehensive services. In 2018, adhering to the customer-centric operation philosophy, the Company continued to improve product structure and internal management procedures in line with customer demands. To further diversify businesses and promote integrated operation, “One Minsheng Strategy (一個民生)” system was established so as to provide more diversified and better services, thus enhance the overall profitability. From the perspective of the Bank, to provide customers with one-stop comprehensive financial services, the Company continued to promote collaboration among different business lines, improve cross-selling and collaboration, and strengthen the comprehensive acquisition and management of customers across different business segments. To refine the management of offline distribution channel, the Company established customer-friendly bank halls. Comprehensive services and marketing in the halls were further improved, resulting in leaping growth of productivity. From the perspective of the Group, coordinated development between the Company and its subsidiaries has been reinforced. To cultivate its comprehensive financial competitiveness, the Group accelerated the diversification of business layout, put forward coordinated operation and improved services to target customers.

16 Annual Awards

Mr. Hong Qi, the Chairman, won the “Entrepreneur with Outstanding Contribution Award in Celebration of the 40th Anniversary of Reform and Opening Up (改革開放四十周年傑出貢獻企業家獎)” by the China Securities Golden Bauhinia Awards;

The Company was honoured as the “Best Bank in China for 2018 (2018年度中國最佳銀行)” by Asia Risk;

The Company won “The Listed Company with the Best Investor Relations Management Award (最佳投資者關係管理上市公司)” in the Golden Bauhinia Awards by China Securities;

The Company won the “Best SME Services Bank (最佳中小企業服務銀行)” in the Stars of China for 2018 awards by Global Finance;

The Company was honoured as the “Bank with the Most Outstanding Small Loan Services of the Year (年度卓越小微貸款服務銀行)” in the “China Financial Excellence Awards (中國卓越金融獎)” held by the Economic Observer;

The Company was named the “Bank for Small Business Finance of the Year (年度小微金融服務銀行)” in the Golden Cicadas awards hosted by China Times;

The Company was named the “Most Innovative Private Bank (最具創新性私人銀行)” by Caijing Magazine;

The Company won the “Outstanding Private Banking Brand Award of Chinese Pioneers for 2018 (2018領航中國傑出私人銀行品牌獎)” by JRJ.com.cn;

The Company was granted the “Outstanding Direct Bank Brand Award (傑出直銷銀行品牌獎)” by JRJ.com.cn;

The Company won the “Best Mobile Banking Award for 2018 (2018年最佳個人手機銀行獎)” by China Financial Certification Authority (CFCA);

The Company was awarded the “Best Fintech Bank (最佳品牌金融科技銀行)” at the Sixth Session of Comprehensive Bank Selection for 2018 (2018第六屆銀行綜合評選) held by Sina Finance;

The Company was presented with the “Hong Kong Investor Relations Awards — Certificate of Excellence (香港投資者關係大獎 — 卓越獎)” by Hong Kong Investor Relations Association;

The Company was honoured as one of the “Hong Kong Stock Connect Companies with Excellent Investment Returns (港股通公司投資回報實力排行榜)” in the “Golden Wing awards (金翼獎)” for 2018 held by Securities Times;

17 The Company was granted the “Annual Report Golden Award (年報金獎)” and “Technical Achievement Award (技術成就獎)” in the 2017 Annual Report Selection held by the League of American Communications Professionals (LACP);

The Company was granted the “Corporate Social Responsibility Award for 2018 (2018年度企業社會責任獎)” by Shanghai Securities News;

The Company was honoured with the 10th “China Charity Award (中華慈善獎)” by the Ministry of Civil Affairs of the PRC.

18 Chapter 1 Bank Profile

1. Registered Chinese Name of the 中國民生銀行股份有限公司 Company: (Abbreviation: “中國民生銀行”) Registered English Name of the CHINA MINSHENG BANKING CORP., LTD. Company: (Abbreviation: “CMBC”)

2. Legal Representative of the Hong Qi Company:

3. Authorised Representatives of Xie Zhichun the Company: Wong Wai Yee, Ella

4. Board Secretary: Bai Dan Company Secretary: Wong Wai Yee, Ella Representatives of Securities Wang Honggang Affairs:

5. Mailing Address: China Minsheng Bank Building, No. 2 Fuxingmennei Avenue, Xicheng District, Beijing, China Postal Code: 100031 Telephone: 86-10-58560975 Facsimile: 86-10-58560720 Email: [email protected]

6. Registered Address: No. 2 Fuxingmennei Avenue, Xicheng District, Beijing, China Postal Code: 100031 Website: www.cmbc.com.cn Email: [email protected]

7. Branch Office and Place of 40/F and 4106–08, 41/F, Two International Finance Business in Hong Kong: Centre, 8 Finance Street, Central, Hong Kong

8. Newspapers Selected by the China Securities Journal, Shanghai Securities News and Company for China Securities Securities Times Journal, Shanghai Securities Information Disclosure: Website Designated by the www.sse.com.cn CSRC for Publishing the A Share Annual Report: Website Designated by the www.hkexnews.hk SEHK for Publishing the H Share Annual Report: Place for Collection of the Office of the Board of the Company Annual Reports: 19 9. Legal Adviser as to PRC Law: Grandall Law Firm, Beijing Office Legal Adviser as to Hong Kong Clifford Chance Law:

10. Domestic Accounting Firm: KPMG Huazhen LLP Office Address: 8th Floor, KPMG Tower Oriental Plaza, No. 1 East Chang An Avenue, Beijing, China International Accounting Firm: KPMG Certified Public Accountants Office Address: 8th Floor, Prince’s Building, 10 Chater Road, Central, Hong Kong Signing Accountants: Dou Youming and Jin Naiwen

11. A Share Registrar: China Securities Depository and Clearing Corporation Limited (Shanghai Branch) Office Address: 36/F, China Insurance Building, No. 166 Lujiazui East Road, New Pudong District, Shanghai, China H Share Registrar: Computershare Hong Kong Investor Services Limited Office Address: Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong

12. Places of Listing, Stock Names and Stock Codes: A Share: SSE; Stock Name: MINSHENG BANK; Stock Code: 600016 H Share: SEHK; Stock Name: MINSHENG BANK; Stock Code: 01988 Offshore Preference Share: SEHK; Stock Name: CMBC 16USDPREF; Stock Code: 04609

13. Initial Date of Registration: 7 February 1996 Initial Place of Registration: No. 4 Zhengyi Road, Dongcheng District, Beijing, China

14. Date of Registration for 20 November 2007 Subsequent Change: Place of Registration: No. 2 Fuxingmennei Avenue, Xicheng District, Beijing, China

15. Unified Social Credit Code: 91110000100018988F

20 Chapter 2 Summary of Accounting Data and Financial Indicators

I. Major Accounting Data and Financial Indicators

Changes of the Reporting Period over the corresponding period of the 2018 2017 previous year 2016 2015 2014

Operating results Increase/ (RMB million) decrease (%) Net interest income 76,680 86,552 -11.41 94,684 94,268 92,136 Net interest income (after adjustment) 97,942 86,552 13.16 94,684 94,268 92,136 Net non-interest income 77,481 55,395 39.87 59,367 59,483 42,871 Operating income 154,161 141,947 8.60 154,051 153,751 135,007 Operating expenses 49,056 47,245 3.83 52,424 58,176 54,082 Impairment losses on loans and advances 43,611 32,180 35.52 41,214 33,029 19,928 Profit before income tax 58,785 60,562 -2.93 60,249 60,774 59,793 Net profit attributable to equity shareholders of the Company 50,327 49,813 1.03 47,843 46,111 44,546 Net cash flow from operating Negative for activities -395,498 -257,059 both periods 1,028,855 225,121 229,163 Data per share (RMB) Basic earnings per share 1.14 1.13 0.88 1.09 1.08 1.09 Diluted earnings per share 1.14 1.13 0.88 1.09 1.06 1.03 Net cash flow per share from Negative for operating activities -9.03 -5.87 both periods 23.50 5.14 5.59 Changes in percentage Profitability indicators (%) point Return on average assets 0.85 0.86 -0.01 0.94 1.10 1.26 Return on weighted average equity 12.94 14.03 -1.09 15.13 16.98 20.41 Cost-to-income ratio 30.58 32.24 -1.66 31.21 31.35 33.39 Net fee and commission income to operating income ratio 31.22 33.63 -2.41 33.92 33.30 28.32 Net interest spread 1.64 1.35 0.29 1.74 2.10 2.41 Net interest margin 1.73 1.50 0.23 1.86 2.26 2.59

21 Changes from the end of the previous year to the end of 31 December 31 December the Reporting 31 December 31 December 31 December 2018 2017 Period 2016 2015 2014

Scale indicators Increase/ (RMB million) decrease (%) Total assets 5,994,822 5,902,086 1.57 5,895,877 4,520,688 4,015,136 Total loans and advances to customers 3,056,746 2,804,307 9.00 2,461,586 2,048,048 1,812,666 Total liabilities 5,563,821 5,512,274 0.94 5,543,850 4,210,905 3,767,380 Total deposits from customers 3,167,292 2,966,311 6.78 3,082,242 2,732,262 2,433,810 Share capital 43,782 36,485 20.00 36,485 36,485 34,153 Total equity attributable to equity shareholders of the Company 420,074 378,970 10.85 342,590 301,218 240,142 Total equity attributable to ordinary share holders of the Company 410,182 369,078 11.14 332,698 301,218 240,142 Net assets per share attributable to ordinary share holders of the Company (RMB) 9.37 8.43 11.15 7.60 6.88 5.86 Changes in percentage Assets quality indicators (%) point NPL ratio 1.76 1.71 0.05 1.68 1.60 1.17 Allowance to NPLs 134.05 155.61 -21.56 155.41 153.63 182.20 Allowance to total loans 2.36 2.66 -0.30 2.62 2.46 2.12 Capital adequacy ratio indicators (%) Core tier-one capital adequacy ratio 8.93 8.63 0.30 8.95 9.17 8.58 Tier-one capital adequacy ratio 9.16 8.88 0.28 9.22 9.19 8.59 Capital adequacy ratio 11.75 11.85 -0.10 11.73 11.49 10.69 Total equity to total assets ratio 7.19 6.60 0.59 5.97 6.85 6.17

Notes: 1. During the comparative period, figures of earnings per share, net cash flow per share from operating activities and net assets per share attributable to holders of ordinary shares of the Company were restated based on the number of shares upon the completion of the capitalisation of the capital reserve in 2017.

2. The new accounting standards in relation to financial instruments have been adopted starting from 1 January 2018, pursuant to which, gains from the holding of financial assets at fair value through profit or loss will no longer be recorded as interest income. During the Reporting Period, the net interest income (after adjustment) amounted to RMB97,942 million, representing an increase of 13.16% as compared with the corresponding period of the previous year.

3. Return on average assets = net profit/average balance of total assets at the beginning and the end of the period.

22 4. Earnings per share and return on weighted average equity: calculated according to regulations including the Preparation Rules for Information Disclosure by Companies Offering Securities to the Public No. 9 — Calculation and Disclosure of Return on Equity and Earnings per Share (2010 Revision) 《公開發行證券的公司信息披露( 編報規則第9號 — 淨資產收益率和每股收益的計算及披露》(2010年修訂)) promulgated by the CSRC, etc. In December 2018, the Company distributed dividends of preference shares, the effect of which was taken into account in calculating the above indicators.

5. Cost-to-income ratio = (operating and other operating expenses – tax and surcharges)/operating income.

6. Net interest spread = return on average balance of interest-earning assets – cost ratio of average balance of interest- bearing liabilities.

7. Net interest margin = net interest income/average balance of interest-earning assets.

8. Total loans and advances to customers and total deposits from customers did not include accrued interests.

9. NPL ratio = total NPLs/total loans and advances to customers.

10. Allowance to NPLs and allowance to total loans were calculated according to Notice on the Regulatory Requirement on Adjustment to Allowance for Impairment Losses on Loans of Commercial Banks 《關於調整( 商業行貸款損失準備監管要求的通知》) (Yin Jian Fa [2018] No.7) promulgated by the CBIRC. Allowance to NPLs = allowance for impairment losses on loans/total NPLs; Allowance to total loans = allowance for impairment losses on loans/total loans and advances to customers.

II. Supplementary Accounting Data and Financial Indicators

(Unit: %)

31 December 31 December 31 December Major Indicators Benchmark 2018 2017 2016

Liquidity ratio Consolidated in RMB ≥25 51.64 39.80 39.64

Note: The above data are information of the Company. The indicators were calculated based on the relevant regulations of the China’s banking regulators.

23 Chapter 3 Discussion and Analysis on Business Operation

I. Review of Economic and Financial Conditions and Government Policies

During the Reporting Period, China’s economy and financial market faced a more complicated environment as global economy recovery slowed down and the growth pace varied. On one hand, the growth of major economies continued to diverge. The United States continued with its trend of rapid growth and the Federal Reserve further increased interest rate and advanced shrinking of balance sheets. Economic growth of Eurozone slowed down. Uncertainties such as Brexit and financial budget issue of Italy hindered back the adoption of normal monetary policies. Affected by natural disasters, the economy of Japan experienced negative growth and fallback of the growth rate of prices, and price rise fell back. Japan’s continued to implement ultra-loose policies. The stronger US dollar and a decline in the risk appetite of global investors brought pressures on some emerging economies. On the other hand, negative factors including rising trade protectionism and escalating trade frictions between major economies deeply affected the global industrial division and the global value chain, which slowed down the growth of trade globally and hindered the progress of economic recovery. Changes in global economic and financial international trend have affected the China’s economy through various ways including export changes, capital flow, fluctuation in exchange rates and price transmission. Uncertainties and challenges have correspondingly increased.

During the Reporting Period, against the backdrop of the complicated and changing internal and external environment, the economic development of China remained generally stable with higher quality and efficiency. Structural adjustment was further promoted through the replacement of old driving forces with new ones. Under multiple constraints, China’s economy also faced changes and uncertainties. Negative factors including complicated external environment and the downward trend in economic growth led to operation difficulties of certain enterprises, which increased credit and liquidity risks and added burden to financial risks prevention and mitigation. China’s government proactively adopted measures to tackle the difficulties. Works had been done to deepen the reform and opening up, advance supply- side structural reform and create a healthy and fair operating environment. The goal of monetary policies of the central bank of China had gradually changed from “ensuring reasonably stable liquidity” to “ensuring reasonably sufficient liquidity”. Through “targeted drips (精準滴灌)” measures including additional investments in MLF, targeted reserve requirement ratio (RRR) cut, increasing refinancing and rediscounting limit, the central bank of China strove to solve NSOEs and small and micro enterprises’ difficulties in and high cost of financing. Proactive fiscal policies were also adopted including reducing taxes and surcharges and strengthening areas of weakness in infrastructure investment. A series of initiatives were introduced to strengthen financial risk prevention and control and local debt management, mitigate stock pledge risks of listed companies and improve the long-term management mechanism of debts. The reform and opening-up of financial industry has accelerated to promote high-quality and efficient support to the real economy of the financial industry.

In face of increasingly favourable financial conditions, the scale of China’s banking industry continued to grow steadily with expanding credit extension, stable net interest margin and enhancing profitability. However, there are problems as well. The operation of enterprises became less vigorous and society’s capability of generating credits were weakened. Transmission mechanism of monetary policies performed unsmoothly and the banking industry

24 met difficulties in increasing and maintaining deposits, tightening capital constraints and increasingly difficult liquidity management. To proactively cope with the changes in business environment, effectively support the development of real economy and prevent various types of financial risks, the Company has adopted the following measures and achieved good results:

1. The Company highly valued strategic guidelines and steadily continued the implementation of its reform and transformation. The Board approved the Overall Implementation Scheme for Reform and Transformation and the Three-year Development Plan of China Minsheng Bank 《中國民生銀行改革轉型暨三年發展規劃整體實( 施方案》). While promoting the transforming and application of the achievements of the Phoenix Project, the Company had clarified the development strategies, business objectives and operating targets for the next three years. Adhering to its strategic positionings of becoming “a bank for the NSOEs, a fintech-based bank and a bank of comprehensive services”, the Company strove to establish a renowned brand of Minsheng Bank in China’s banking industry.

2. Adhering to its historical mission of “From the People, For the People (為民而生，與民共生)”, the Company has developed its distinctive competitiveness. The Company expanded the customer base with focus on NSOEs and further enhanced its capability to serve NSOEs, striving to become a host bank and preferred bank of high-quality NSOEs. The Company enhanced its core competitiveness in serving strategic NSOEs through various measures, including establishing core platforms, refining integrated systems, improving professional services, allocating additional resources and developing management systems concerning customer relationship. The Company focused on NSOEs and positioned itself as a scenarised transaction bank, a customised investment bank, a convenient online bank and a comprehensive wealth management bank. In respect of retail banking business, based on the “ecosystem of NSOEs”, the Company developed three core customer bases including NSOEs, small and micro enterprises, and private banking entrepreneurs, and provided efficient, considerate, in-depth and valuable services for NSOEs and entrepreneurs.

3. The Company strove to develop new engines to reform and transformation with the support of a dual force of “data + technology”. In active response to the opportunities and challenges arising from fintech development, the Company enhanced its smart services by promoting the development of direct bank, remote banking, online small business loans and credit card online services, with the transformation of distributive framework and data management acted as two driving forces to promote the implementations of strategies and reform and transformation.

4. To become a bank of comprehensive services and achieve high-quality growth, the Company established a “customer-centric” integrated service system. The Company strengthened the integrated operation among corporate, retail and financial markets businesses and emphasised the synergy between enterprises and individuals and business coordination. A cross-selling mechanism was also established. All these efforts were aimed to establish an integrated comprehensive business model with coordination between departments and business lines. Overseas network had been optimised so as to accelerate the group-based development and facilitate business coordination among the Head Office, overseas business units and subsidiaries.

25 5. The Company accelerated the implementation of the system and mechanism reform of SBUs. Ten SBUs were established, namely the Real Estate Finance SBU, Group Finance SBU, Credit Card Centre, Investment Banking Direct Sales SBU, Small Business Finance SBU, Private Banking SBU, Supply Chain Finance SBU, Financial Markets Department, Asset Management Department and Direct Bank SBU. To further improve the system and mechanism of SBUs, the Company adopted differentiated management based on segmentations, clarified the business scope and performance accounting and appraisal mechanism of each SBU, and adopted reasonable incentive and restraint mechanism for each SBU.

6. The Company optimised the allocation of assets, liabilities and financial resources. Efficient capital strategies, scientific pricing strategies and prudent liquidity strategies were formulated. The Company refined financial accounting, professional financial management and comprehensively enhanced the utilisation of its financial resources and financial platform support. The Company continued to push forward the implementation of cost reduction and efficiency improvement measures and the establishment of cost management system, enhance its budget and capital management as well as resources allocation so as to support the reform and transformation and the development of major businesses.

7. The Company enhanced its comprehensive risk management. A risk management system was developed to adapt to, lead, promote and secure business development. Risk culture and legal compliance standards were strengthed. The Company adjusted and optimised duties of the Internal Control and Compliance Department, Legal Affairs Department and Audit Department, established an overall comprehensive internal control and compliance system, refined its risk management of strategic core businesses and duly fulfilled auditing responsibility. The Company also optimised business structure, innovated disposals of non- performing assets and steadily improved assets quality.

II. Overview of Operations

During the Reporting Period, the Company took proactive measures in coping with the adjustments and changes in the internal and external operating environment. According to the strategic positioning of becoming “a bank for the NSOEs, a fintech-based bank and a bank of comprehensive services” and adhering to its customer-centric principle, the Company duly served the real economy and accelerated the implementation of reform and transformation. Significant results were achieved. The Company grasped market opportunities timely and continued to optimise its operational structure. The disposal of non-performing assets was enhanced, the assets quality remained stable and the profitability was improved steadily. A stable and healthy development was achieved in all business lines of the Company.

(I) Stable operation and profitability and continuous improvement of operating efficiency

During the Reporting Period, the Group recorded net profit attributable to equity shareholders of the Company of RMB50,327 million, representing an increase of RMB514 million, or 1.03%, as compared with the corresponding period of the previous year. Operating income amounted to RMB154,161 million, representing an increase of RMB12,214 million, or 8.60%, as compared with the corresponding period of the previous year. Net interest margin was 1.73%, representing an increase of 0.23 percentage points as compared with

26 the corresponding period of the previous year. Return on weighted average equity and return on average assets were 12.94% and 0.85%, respectively, representing decreases of 1.09 percentage points and 0.01 percentage points as compared with the corresponding period of the previous year, respectively. Basic earnings per share was RMB1.14, increased by RMB0.01 as compared with the corresponding period of the previous year. Net asset per share attributable to ordinary share holders of the Company amounted to RMB9.37, increased by RMB0.94 as compared with the end of the previous year.

Cost reduction and operation efficiency enhancement of the Company were under solid progress and profitability was improved. Cost management has been further refined and ratio of necessary operating cost has decreased. Cost structure continued to optimise and operating efficiency has been further enhanced. During the Reporting Period, the cost-to- income ratio of the Group recorded at 30.58%, representing a decrease of 1.66 percentage points as compared with the corresponding period of the previous year.

(II) Coordinated growth of assets and liabilities and continuous optimisation of business structure

During the Reporting Period, the Group proactively adjusted the structure of its asset and liability business, and total assets of the Group increased moderately. As at the end of the Reporting Period, total assets of the Group amounted to RMB5,994,822 million, representing an increase of RMB92,736 million, or 1.57%, as compared with the end of the previous year. Among which, the total amount of loans was RMB3,056,746 million, representing an increase of RMB252,439 million, or 9.00%, as compared with the end of the previous year. Total liabilities amounted to RMB5,563,821 million, representing an increase of RMB51,547 million, or 0.94%, as compared with the end of the previous year. Of which, the total deposits amounted to RMB3,167,292 million, representing an increase of RMB200,981 million, or 6.78%, as compared with the end of the previous year.

For assets business, as at the end of the Reporting Period, total loans (including discounted bills) of the Group accounted for 50.99% of total assets, increased by 3.48 percentage points as compared with the end of the previous year. The total amount of loans to small and micro enterprises was RMB415,564 million, representing an increase of RMB42,302 million, or 11.33%, as compared with the end of the previous year. Among which, total lendings to small and micro enterprises with rating of grade 5 or above accounted for 86.25%, representing an increase of 4.92 percentage points as compared with the end of the previous year.

For liability business, as at the end of the Reporting Period, total deposits of the Group accounted for 56.93% of total liabilities, representing an increase of 3.12 percentage points as compared with the end of the previous year. Among which, retail deposits accounted for 18.16%, representing an increase of 1.57 percentage points as compared with the end of the previous year while total interbank liabilities (including interbank negotiable certificates of deposit (IBNCD)) accounted for 28.95%, representing a decrease of 2.95 percentage points as compared with the end of the previous year.

27 (III) Full implementation of reform and favourable development of major businesses

During the Reporting Period, the Company focused on major businesses and further advanced its reform and transformation. Key implementation measures were further clarified and supporting management system, coordination mechanism and organisation system were established to ensure a smooth implementation of the Company’s reform and transformation.

On one hand, the Company continued to expand its customer base and consolidated its business foundation. In respect of corporate customers, the Company adhered to its NSOE strategy and continued to improve the efficiency and quality of financing services to NSOEs. As at the end of the Reporting Period, the total number of strategic NSOE customers was 354, with daily average deposits of RMB193,263 million and total loans of RMB204,910 million, representing an increase of 8.92% and 12.09%, respectively, as compared with the end of the previous year. Supply chain finance has introduced the industrial solutions of “Express Series (通系列)” and the comprehensive financial services of the “E Series” had been completed. Ecological service system for supply chain customers groups has been initially formed. The number of core customers of supply chain finance increased by 121.43% as compared with the end of the previous year. The number of domestic corporate customers with deposit balance in the Company increased by 155.1 thousand, or 15.31%, to 1,167.9 thousand as compared with the end of the previous year. The number of domestic customers with general loans balance of the Company was 9,926. Customer base was further consolidated. In respect of retail customers, the Company focused on major customer groups, including small and micro enterprise customers and VIP customers, and implemented a segmented and differentiated management of different groups. The Company further deepened the comprehensive development of its retail customer base through wealth management. As at the end of the Reporting Period, VIP customers of retail banking business amounted to 2,933.0 thousand, representing an increase of 12.15% as compared with the end of the previous year. Private banking customers amounted to 19,250, representing an increase of 16.97% as compared with the end of the previous year. Financial assets of individual customers under management amounted to RMB1,650,120 million, representing an increase of RMB213,760 million as compared with the end of the previous year. Operating income of retail business amounted to RMB56,357 million, representing an increase of 17.02% as compared with the corresponding period of the previous year.

On the other hand, the Company continued to optimise its products and services and improved its integrated operating capability. For financial markets business, the Company proactively adapted to the trend of product standardisation, accelerated the transformation of its products and business model, and continued to enhance its capabilities in investment transactions and asset management. As at the end of the Reporting Period, the scale of total assets under custody of the Company (including various types of funds under regulation) was RMB8,714,750 million, representing an increase of 12.60% as compared with the end of the previous year. Total amount of pensions under the custody of the Company was RMB243,990 million, increased by RMB158,956 million, or 186.93%, as compared with the end of the previous year. The existing scale of wealth management products amounted to RMB1,440,555 million. The transaction amount of agency and

28 proprietary trading of precious metal and foreign exchanges remained among top of the market. In respect of internet finance business, the Company proactively explored new development models of internet finance and continued to innovate products and services of direct bank, retail internet finance, corporate internet finance and online payment. The Company continued to rank among top in the banking industry in terms of transaction frequencies of customers. As at the end of the Reporting Period, the number of direct bank customers of the Company reached 19,171.3 thousand with financial assets of RMB132,291 million under the Company’s management. As at the end of the Reporting Period, total number of corporate online banking customers was 1,161.8 thousand with total amount of RMB57.24 trillion in 99,097.3 thousand transactions during the Reporting Period. Total amount of Kua Hang Tong (跨行通) transactions was RMB230,560 million, and the total amount of online payments was RMB6.20 trillion. In respect of integrated operation, relying on its overseas business platforms, the Company continued to expand its overseas business market, strengthen cross-selling and business coordination as well as improve cross-border financial services. International competitiveness and influence of the Company have been further strengthened. During the Reporting Period, net profit of the Hong Kong Branch of the Company amounted to HKD1,456 million, representing an increase of 37.88% as compared with the corresponding period of the previous year. Net profit of CMBC International amounted to HKD372 million, representing an increase of 65.33% as compared with the corresponding period of the previous year.

(IV) Enhanced risk management and basically stable asset quality

During the Reporting Period, the Group continued to improve its mechanisms in relation to regular and differentiated customer risk monitoring, evaluation and classification, so as to further refine its targeted post-loan management for existing loans and duly strengthen risk prevention in key areas. In addition, the Company continuously enhanced its disposal of NPLs to maintain stable asset quality. Total allowances used for writing off and transferring non-performing assets recorded RMB58,421 million.

As at the end of the Reporting Period, total outstanding balance of NPLs of the Group amounted to RMB53,866 million, increased by RMB5,977 million, or 12.48%, as compared with the end of the previous year. The NPL ratio was 1.76%, representing an increase of 0.05 percentage points as compared with the end of the previous year. The allowance to NPLs was 134.05% and 2.36%, respectively, representing a decrease of 21.56 percentage points and 0.30 percentage points, respectively, as compared with the end of the previous year. The allowance to NPLs and allowance to total loans were in compliance with the Notice on the Regulatory Requirement on Adjustment to Allowance for Impairment Losses on Loans of Commercial Banks 《關於調整商業行貸款損失準( 備監管要求的通知》) (Yin Jian Fa [2018] No.7) issued by the CBIRC.

29 III. Analysis of Major Items of Statement of Profit or Loss

During the Reporting Period, the Group realised net profit attributable to equity shareholders of the Company of RMB50,327 million, maintaining a steady growth with an increase of RMB514 million, or 1.03%, as compared with the corresponding period of the previous year.

The major profit and loss items of the Group and their changes are listed below:

(Unit: RMB million)

Item 2018 2017 Change (%)

Operating income 154,161 141,947 8.60 Of which: Net interest income 76,680 86,552 -11.41 Net non-interest income 77,481 55,395 39.87 Operating expenses 49,056 47,245 3.83 Impairment losses on assets 46,320 34,140 35.68 Profit before income tax 58,785 60,562 -2.93 Less: Income tax expense 8,455 9,640 -12.29 Net profit 50,330 50,922 -1.16 Of which: Net profit attributable to equity shareholders of the Company 50,327 49,813 1.03 Profit or loss attributable to non-controlling interests 3 1,109 -99.73

Note: According to the Notice on Revising the Format of Financial Statements for 2018 of Financial Enterprises (Cai Kuai [2018] No.36) 《關於修訂印發( 2018年度金融企業財務報表格式的通知》(財會[2018]36號)), impairment losses on assets during the Reporting Period were presented in this report as impairment losses on credit and impairment losses on other assets, respectively, which were collectively referred to as impairment losses on assets in this chapter.

30 The amounts, percentages and changes of major items of the Group’s operating income are as follows:

(Unit: RMB million)

2018 2017 Item Amount % of total Amount % of total Change (%)

Net interest income 76,680 49.74 86,552 60.97 -11.41 Interest income 235,347 152.66 230,910 162.67 1.92 Of which: Interest income from loans and advances to customers 147,387 95.61 126,452 89.07 16.56 Interest income from investment 60,987 39.56 78,995 55.65 -22.80 Interest income from placements with banks and other financial institutions 10,051 6.52 6,708 4.73 49.84 Interest income from long-term receivables 6,733 4.37 6,431 4.53 4.70 Interest income from balances with central bank 5,768 3.74 6,870 4.84 -16.04 Interest income from financial assets held under resale agreements 3,321 2.15 2,662 1.88 24.76 Interest income from balances with banks and other financial institutions 1,100 0.71 2,792 1.97 -60.60 Interest expenses -158,667 -102.92 -144,358 -101.70 9.91 Net non-interest income 77,481 50.26 55,395 39.03 39.87 Net fee and commission income 48,131 31.22 47,742 33.63 0.81 Other net non-interest income 29,350 19.04 7,653 5.40 283.51

Total 154,161 100.00 141,947 100.00 8.60

(I) Net interest income and net interest margin

After the adoption of new accounting standards for financial instruments, gains from the holding of financial assets at fair value through profit or loss will no longer be recorded as interest income. During the Reporting Period, net interest income of the Group was RMB76,680 million. After adjustment of the above income of RMB21,262 million, net interest income of the Group was RMB97,942 million, representing an increase of RMB11,390 million, or 13.16%, as compared with the corresponding period of the previous year. In accordance with the analysis of net interest income (after adjustment), the growth of business scale contributed to an increase of RMB495 million in net interest income, and the changes in interest rate contributed to an increase of RMB10,895 million in the net interest income.

During the Reporting Period, in accordance with the calculation of net interest income (after adjustment), net interest margin of the Group was 1.73%, representing an increase of 0.23 percentage points as compared with the corresponding period of the previous year, which was due to the increase of interest spread level.

31 The analysis of the net interest income (after adjustment) of the Group is listed below:

(Unit: RMB million)

2018 2017 Interest income Average (after Average Average Interest Average Item balance adjustment) return (%) balance income return (%)

Interest-earning assets Total loans and advances to customers 2,847,287 147,387 5.18 2,690,724 126,452 4.70 Of which: Corporate loans and advances 1,833,908 91,442 4.99 1,675,513 75,876 4.53 Personal loans and advances 1,013,379 55,945 5.52 1,015,211 50,576 4.98 Investment in trading and banking books 1,950,769 82,249 4.22 2,129,284 78,995 3.71 Balances with central bank 367,301 5,768 1.57 439,054 6,870 1.56 Placements with banks and other financial institutions 227,600 10,051 4.42 174,556 6,708 3.84 Long-term receivables 120,352 6,733 5.59 108,016 6,431 5.95 Financial assets held under resale agreements 88,113 3,321 3.77 68,431 2,662 3.89 Balances with banks and other financial institutions 59,164 1,100 1.86 144,389 2,792 1.93

Total 5,660,586 256,609 4.53 5,754,454 230,910 4.01

32 2018 2017 Average Interest Average Average Interest Average Item balance expenses cost (%) balance expenses cost (%)

Interest-bearing liabilities Deposits from customers 3,065,952 66,431 2.17 2,970,088 52,244 1.76 Of which: Corporate deposits 2,532,141 56,173 2.22 2,446,634 43,531 1.78 Demand 1,061,651 10,252 0.97 1,109,744 9,999 0.90 Time 1,470,490 45,921 3.12 1,336,890 33,532 2.51 Personal deposits 533,811 10,258 1.92 523,454 8,713 1.66 Demand 188,747 727 0.39 173,884 816 0.47 Time 345,064 9,531 2.76 349,570 7,897 2.26 Balances from banks and other financial institutions 1,137,058 43,553 3.83 1,189,278 47,496 3.99 Debt securities issued 548,994 23,632 4.30 465,285 18,947 4.07 Borrowings from central bank and other financial institutions 464,152 17,336 3.73 453,317 15,882 3.50 Placements from banks and other financial institutions 158,220 4,466 2.82 194,973 4,337 2.22 Financial assets sold under repurchase agreements 108,585 3,249 2.99 152,284 5,452 3.58

Total 5,482,961 158,667 2.89 5,425,225 144,358 2.66

Net interest income 97,942 86,552 Net interest spread 1.64 1.35 Net interest margin 1.73 1.50

Note: In this table, outward remittance and remittance payables are included in corporate demand deposits; issuance of certificates of deposit is included in corporate time deposits.

33 The impact of changes in scale of the Group and changes in interest rate on interest income and interest expenses were as follow:

(Unit: RMB million)

Changes Changes in in interest scale from rate from Net increase/ Item 2017 to 2018 2017 to 2018 decrease

Changes in interest income (after adjustment): Total loans and advances to customers 7,358 13,577 20,935 Investment in trading and banking books -6,623 9,877 3,254 Balances with central bank -1,123 21 -1,102 Placements with banks and other financial institutions 2,038 1,305 3,343 Long-term receivables 734 -432 302 Financial assets held under resale agreements 766 -107 659 Balances with banks and other financial institutions -1,648 -44 -1,692

Subtotal 1,502 24,197 25,699

Changes in interest expenses: Deposits from customers 1,686 12,501 14,187 Deposits from banks and other financial institutions -2,086 -1,857 -3,943 Debt securities issued 3,409 1,276 4,685 Borrowings from central bank and other financial institutions 380 1,074 1,454 Placements from banks and other financial institutions -818 947 129 Financial assets sold under repurchase agreements -1,564 -639 -2,203

Subtotal 1,007 13,302 14,309

Changes in net interest income (after adjustment) 495 10,895 11,390

Note: Change in scale is measured by the change of average balance; change in interest rate is measured by the change of average interest rate.

34 1. Interest income

During the Reporting Period, interest income of the Group was RMB235,347 million. After the adjustment of gains from the holding of financial assets at fair value through profit or loss of RMB21,262 million, interest income was RMB256,609 million, representing an increase of RMB25,699 million, or 11.13%, as compared with the corresponding period of the previous year, which was mainly due to the increases of interest income from loans and advances to customers of the Group.

(1) Interest income from loans and advances to customers

During the Reporting Period, interest income from loans and advances to customers of the Group recorded RMB147,387 million, representing an increase of RMB20,935 million, or 16.56%, as compared with the corresponding period of the previous year. In particular, interest income from corporate loans and advances amounted to RMB91,442 million, representing an increase of RMB15,566 million, or 20.52%, as compared with the corresponding period of the previous year. Interest income from personal loans and advances amounted to RMB55,945 million, representing an increase of RMB5,369 million, or 10.62%, as compared with the corresponding period of the previous year.

(2) Interest income from investment

During the Reporting Period, interest income from investment of the Group was RMB60,987 million. After the adjustment of gains from the holding of financial assets at fair value through profit or loss of RMB21,262 million, interest income from investment was RMB82,249 million, representing an increase of RMB3,254 million, or 4.12%, as compared with the corresponding period of the previous year.

(3) Interest income from balances and placements with banks and other financial institutions and financial assets held under resale agreements

During the Reporting Period, interest income from balances and placements with banks and other financial institutions and financial assets held under resale agreements of the Group was RMB14,472 million, representing an increase of RMB2,310 million, or 18.99%, as compared with the corresponding period of the previous year. The increase was mainly due to the increase in the business scale and interest rate of the placements with banks.

(4) Interest income from long-term receivables

During the Reporting Period, interest income from long-term receivables of the Group amounted to RMB6,733 million, representing an increase of RMB302 million, or 4.70%, as compared with the corresponding period of the previous year.

35 (5) Interest income from balances with central bank

During the Reporting Period, interest income from balances with central bank of the Group was RMB5,768 million, representing a decrease of RMB1,102 million, or 16.04%, as compared with the corresponding period of the previous year.

2. Interest expenses

During the Reporting Period, interest expenses of the Group was RMB158,667 million, representing an increase of RMB14,309 million, or 9.91%, as compared with the corresponding period of the previous year. The increase was mainly due to the higher cost ratio of interest-bearing liabilities.

(1) Interest expenses on deposits from customers

During the Reporting Period, interest expenses on deposits from customers of the Group amounted to RMB66,431 million, representing an increase of RMB14,187 million, or 27.16%, as compared with the corresponding period of the previous year.

(2) Interest expenses on deposits and placements from banks and other financial institutions and financial assets sold under repurchase agreements

During the Reporting Period, interest expenses on deposits and placements from banks and other financial institutions and financial assets sold under repurchase agreements of the Group amounted to RMB51,268 million, representing a decrease of RMB6,017 million, or 10.50%, as compared with the corresponding period of the previous year.

(3) Interest expenses on debt securities issued

During the Reporting Period, interest expenses on debt securities issued of the Group amounted to RMB23,632 million, representing an increase of RMB4,685 million, or 24.73%, as compared with the corresponding period of the previous year. The increase was mainly due to the growth in the issuance scale of IBNCD and higher interest rate.

(4) Interest expenses on borrowings from central bank and other financial institutions and other interest expenses

During the Reporting Period, interest expenses on borrowings from central bank and other financial institutions and other interest expenses of the Group amounted to RMB17,336 million, representing an increase of RMB1,454 million, or 9.16%, as compared with the corresponding period of the previous year. The increase was mainly due to the higher interest rates of borrowings from central bank and other financial institutions.

36 (II) Net non-interest income

During the Reporting Period, net non-interest income of the Group amounted to RMB77,481 million. After deduction of gains from the holding of financial assets at fair value through profit or loss of RMB21,262 million, net non-interest income of the Group amounted to RMB56,219 million, representing an increase of RMB824 million, or 1.49%, as compared with the corresponding period of the previous year.

(Unit: RMB million)

Item 2018 2017 Change (%)

Net fee and commission income 48,131 47,742 0.81 Other net non-interest income 29,350 7,653 283.51

Total 77,481 55,395 39.87

1. Net fee and commission income

During the Reporting Period, net fee and commission income of the Group amounted to RMB48,131 million, representing an increase of RMB389 million, or 0.81%, as compared with the corresponding period of the previous year.

(Unit: RMB million)

Item 2018 2017 Change (%)

Bank card services 28,946 22,009 31.52 Agency services 8,869 11,648 -23.86 Trust and other fiduciary services 7,092 13,085 -45.80 Settlement services 3,415 3,028 12.78 Credit commitments 2,653 2,493 6.42 Others 1,709 1,805 -5.32

Fee and commission income 52,684 54,068 -2.56 Less: Fee and commission expenses 4,553 6,326 -28.03

Net fee and commission income 48,131 47,742 0.81

37 2. Other net non-interest income

During the Reporting Period, other net non-interest income of the Group was RMB29,350 million. After deduction of gains from the holding of financial assets at fair value through profit or loss of RMB21,262 million, other net non-interest income of the Group amounted to RMB8,088 million, representing an increase of RMB435 million, or 5.68%, as compared with the corresponding period of the previous year.

(Unit: RMB million)

Item 2018 2017 Change (%)

Net trading gain 24,267 1,366 N/A Net gain arising from disposals of securities and discounted bills 3,051 3,874 -21.24 Other operating income 2,032 2,413 -15.79

Total 29,350 7,653 283.51

(III) Operating expenses

During the Reporting Period, the Group continued to refine financial management and implement cost reduction and efficiency enhancement measures to improve its cost structure. Operating expenses amounted to RMB49,056 million, representing an increase of RMB1,811 million, or 3.83%, as compared with the corresponding period of the previous year.

(Unit: RMB million)

Item 2018 2017 Change (%)

Staff cost (including Directors’ emoluments) 25,882 25,119 3.04 Rental and property management expenses 4,101 4,337 -5.44 Depreciation and amortisation 3,118 3,350 -6.93 Office expenses 1,444 1,610 -10.31 Tax and surcharges 1,919 1,484 29.31 Business expenses and others 12,592 11,345 10.99

Total 49,056 47,245 3.83

38 (IV) Impairment losses on assets

During the Reporting Period, the Group recorded impairment losses on assets of RMB46,320 million, representing an increase of RMB12,180 million, or 35.68%, as compared with the corresponding period of the previous year.

(Unit: RMB million)

Item 2018 2017 Change (%)

Loans and advances to customers 43,611 32,180 35.52 Financial assets at amortised cost 1,475 — Financial assets at fair value through other N/A comprehensive income 747 — Loans and receivables — 634 Long-term receivables 631 449 40.53 Others -144 877 Negative for this period

Total 46,320 34,140 35.68

(V) Income tax expenses

During the Reporting Period, income tax expenses of the Group amounted to RMB8,455 million, representing a decrease of RMB1,185 million, or 12.29%, as compared with the corresponding period of the previous year.

39 IV. Analysis of Major Items of Statement of Financial Position

(I) Assets

During the Reporting Period, total assets of the Group maintained moderate growth. As at the end of the Reporting Period, total assets of the Group amounted to RMB5,994,822 million, representing an increase of RMB92,736 million, or 1.57%, as compared with the end of the previous year.

The components of the Group’s total assets are listed below:

(Unit: RMB million)

31 December 2018 31 December 2017 31 December 2016 Item Amount % of total Amount % of total Amount % of total

Gross balance of loans and advances to customers 3,056,746 50.99 2,804,307 47.51 2,461,586 41.76 Add: Accrued interests on loans 22,742 0.38 — — — — Less: Allowance for impairment losses on loans at amortised cost 71,216 1.19 74,519 1.26 64,394 1.09 Net balance of loans and advances to customers 3,008,272 50.18 2,729,788 46.25 2,397,192 40.67 Net investment in trading and banking books 1,970,017 32.86 2,135,897 36.19 2,206,909 37.43 Cash and balances with central bank 389,281 6.49 442,938 7.50 524,239 8.89 Balances and placements with banks and other financial institutions and financial assets held under resale agreements 337,869 5.64 271,274 4.60 461,837 7.83 Long-term receivables 110,824 1.85 101,304 1.72 94,791 1.61 Property and equipment 48,765 0.81 48,338 0.82 46,190 0.78 Others 129,794 2.17 172,547 2.92 164,719 2.79

Total 5,994,822 100.00 5,902,086 100.00 5,895,877 100.00

Note: Net investment in trading and banking books includes financial assets at fair value through profit or loss, financial assets measured at fair value through other comprehensive income and financial assets at amortised cost during the Reporting period while financial assets at fair value through profit or loss, available-for-sale securities, held-to-maturity securities as well as loans and receivables in the comparative period.

40 1. Loans and advances to customers

As at the end of the Reporting Period, total loans and advances to customers of the Group amounted to RMB3,056,746 million, representing an increase of RMB252,439 million, or 9.00%, as compared with the end of the previous year. Total loans and advances to customers accounted for 50.99% of total assets, representing an increase of 3.48 percentage points as compared with the end of the previous year.

The breakdown of loans and advances by product type is as follows:

(Unit: RMB million)

31 December 2018 31 December 2017 31 December 2016 Item Amount % of total Amount % of total Amount % of total

Corporate loans and advances 1,826,201 59.74 1,698,480 60.57 1,560,664 63.40 Of which: Discounted bills 96,523 3.16 82,650 2.95 165,800 6.74 Personal loans and advances 1,230,545 40.26 1,105,827 39.43 900,922 36.60

Total 3,056,746 100.00 2,804,307 100.00 2,461,586 100.00

The breakdown of personal loans and advances is as follows:

(Unit: RMB million)

31 December 2018 31 December 2017 31 December 2016 Item Amount % of total Amount % of total Amount % of total

Loans to small and micro enterprises 415,564 33.77 373,262 33.75 335,074 37.19 Credit card overdrafts 393,249 31.96 294,019 26.59 207,372 23.02 Residential mortgage 335,502 27.26 350,986 31.74 295,875 32.84 Others 86,230 7.01 87,560 7.92 62,601 6.95

Total 1,230,545 100.00 1,105,827 100.00 900,922 100.00

41 2. Investment in trading and banking books

As at the end of the Reporting Period, net investment in trading and banking books of the Group amounted to RMB1,970,017 million, representing a decrease of RMB165,880 million, or 7.77%, as compared with the end of the previous year, and accounted for 32.86% of the total assets, representing a decrease of 3.33 percentage points as compared with the end of the previous year.

(1) Structure of investment in trading and banking books

The structure of investment in trading and banking books of the Group is as follows:

(Unit: RMB million)

31 December 2018 31 December 2017 Item Amount % of total Amount % of total

Financial assets at amortised cost 1,127,231 57.22 — — Financial assets at fair value through other comprehensive income 461,693 23.44 — — Financial assets at fair value through profit or loss 381,093 19.34 74,601 3.49 Loans and receivables — — 974,163 45.61 Held-to-maturity securities — — 708,244 33.16 Available-for-sale securities — — 378,889 17.74

Total 1,970,017 100.00 2,135,897 100.00

42 (2) Holdings of financial bonds

As at the end of the Reporting Period, financial bonds held by the Group were mainly debt securities of commercial banks and policy financial bonds. The top ten financial bonds in terms of par value are as follows:

(Unit: RMB million)

Allowance Annual interest for impairment Item Par value rate (%) Maturity date losses

2016 financial bonds 3,432 3.43 2019-09-29 1.11 2016 financial bonds 3,330 3.18 2026-04-05 0.59 2017 financial bonds 3,000 4.20 2020-04-17 1.80 2016 financial bonds 2,890 3.20 2019-07-18 1.01 2017 financial bonds 2,840 4.02 2022-04-17 0.51 2018 financial bonds 2,510 4.69 2023-03-23 0.46 2017 financial bonds 2,500 4.30 2020-09-05 1.50 2013 financial bonds 2,480 3.03 2020-04-08 0.45 2018 financial bonds 2,460 3.68 2021-09-07 0.39 2018 financial bonds 2,430 3.76 2023-08-14 0.44

Total 27,872 8.26

3. Balances and placements with banks and other financial institutions and financial assets held under resale agreements

As at the end of the Reporting Period, balances and placements with banks and other financial institutions and financial assets held under resale agreements of the Group amounted to RMB337,869 million, representing an increase of RMB66,595 million, or 24.55%, as compared with the end of the previous year, and accounted for 5.64% of the total assets, representing an increase of 1.04 percentage points as compared with the end of the previous year.

43 4. Derivative financial instruments

(Unit: RMB million)

31 December 2018 Notional Fair value

Item amount Assets Liabilities

Interest rate swaps 1,620,687 1,807 461 Currency swaps 1,406,375 15,092 13,847 Currency options 166,808 1,171 1,139 Precious metal derivatives 122,197 14,080 1,934 Currency forwards 66,739 343 614 Extension options 5,000 — — Commodity options 3,700 596 3 Credit derivatives 137 3 — Others 590 20 2

Total 33,112 18,000

(II) Liabilities

As at the end of the Reporting Period, the Group’s total liabilities amounted to RMB5,563,821 million, representing an increase of RMB51,547 million, or 0.94%, as compared with the end of the previous year.

The breakdown of the Group’s total liabilities is listed below:

(Unit: RMB million)

31 December 2018 31 December 2017 31 December 2016 Item Amount % of total Amount % of total Amount % of total

Deposits from customers 3,194,441 57.41 2,966,311 53.81 3,082,242 55.60 Of which: total deposits from customers (excluding accrued interests) 3,167,292 56.93 2,966,311 53.81 3,082,242 55.60 Deposits and placements from banks and other financial institutions and financial assets sold under repurchase agreements 1,181,547 21.24 1,423,515 25.82 1,521,274 27.44 Debt securities issued 674,523 12.12 501,927 9.11 398,376 7.19 Borrowings from central bank and other financial institutions 429,366 7.72 482,172 8.75 437,912 7.90 Others 83,944 1.51 138,349 2.51 104,046 1.87

Total 5,563,821 100.00 5,512,274 100.00 5,543,850 100.00

44 1. Deposits from customers

As at the end of the Reporting Period, deposits from customers of the Group (excluding accrued interests) amounted to RMB3,167,292 million, representing an increase of RMB200,981 million, or 6.78%, as compared with the end of the previous year. In respect of customer structure, the proportions of corporate deposits, personal deposits and other deposits in total deposits were 81.42%, 18.16% and 0.42%, respectively. In respect of maturity structure, the proportions of demand deposits, time deposits and other deposits in total deposits were 41.13%, 58.45% and 0.42%, respectively.

(Unit: RMB million)

31 December 2018 31 December 2017 31 December 2016 Item Amount % of total Amount % of total Amount % of total

Corporate deposits 2,578,613 81.42 2,455,247 82.77 2,522,232 81.83 Demand 1,104,706 34.88 1,187,367 40.03 1,141,097 37.02 Time 1,473,907 46.54 1,267,880 42.74 1,381,135 44.81 Personal deposits 575,289 18.16 492,008 16.59 540,548 17.54 Demand 197,933 6.25 182,652 6.16 167,686 5.44 Time 377,356 11.91 309,356 10.43 372,862 12.10 Certificates of deposit 10,444 0.33 12,069 0.41 12,792 0.42 Outward remittance and remittance payables 2,946 0.09 6,987 0.23 6,670 0.21

Total deposits from customers 3,167,292 100.00 2,966,311 100.00 3,082,242 100.00

2. Deposits and placements from banks and other financial institutions and financial assets sold under repurchase agreements

As at the end of the Reporting Period, total deposits and placements from banks and other financial institutions and financial assets sold under repurchase agreements of the Group amounted to RMB1,181,547 million, representing a decrease of RMB241,968 million, or 17.00%, as compared with the end of the previous year.

3. Debt securities issued

As at the end of the Reporting Period, total debt securities issued by the Group amounted to RMB674,523 million, representing an increase of RMB172,596 million, or 34.39%, as compared with the end of the previous year. The increase was mainly due to the increase in the issuance scale of IBNCD and special financial bonds for small and micro enterprises.

45 (III) Shareholders’ equity

As at the end of the Reporting Period, total shareholders’ equity of the Group amounted to RMB431,001 million, representing an increase of RMB41,189 million, or 10.57%, as compared with the end of the previous year. Among which, total equity attributable to equity shareholders of the Company amounted to RMB420,074 million, representing an increase of RMB41,104 million, or 10.85%, as compared with the end of the previous year. The increase in the shareholders’ equity was mainly due to the increase of net profit of the Group.

(Unit: RMB million)

31 December 31 December Change Item 2018 2017 (%)

Share capital 43,782 36,485 20.00 Other equity instruments 9,892 9,892 — Of which: Preference shares 9,892 9,892 — Reserves 173,269 169,173 2.42 Of which: Capital reserve 57,470 64,753 -11.25 Surplus reserve 39,911 34,914 14.31 General reserve 74,370 74,168 0.27 Other reserves 1,518 -4,662 Negative for previous period Retained earnings 193,131 163,420 18.18

Total equity attributable to equity shareholders of the Company 420,074 378,970 10.85 Non-controlling interests 10,927 10,842 0.78

Total 431,001 389,812 10.57

46 (IV) Off-balance sheet items

Balances of major off-balance sheet items of the Group are as follows:

(Unit: RMB million)

31 December 31 December Change Item 2018 2017 (%)

Bank acceptances 518,408 461,630 12.30 Guarantees 136,864 141,929 -3.57 Letters of credit 113,207 107,523 5.29 Unused credit card commitments 231,054 100,714 129.42 Capital commitments 18,412 19,116 -3.68 Operating lease commitments 14,149 14,003 1.04 Finance lease commitments 3,193 3,160 1.04 Irrevocable loan commitments 3,988 4,286 -6.95

(V) Market share of major products and services

According to the Summary of Sources & Uses of Funds of Financial Institutions (in RMB and Foreign Currency) 《金融機構本外幣信貸收支月報表》( ) of December 2018 released by the PBOC, among nine national joint-stock commercial banks in China, as at the end of the Reporting Period, the market share of total deposits of the Company amounted to 12.81%, representing a decrease of 0.33 percentage points as compared with the end of the previous year. Among nine national joint-stock commercial banks in China, the market share of total loans of the Company amounted to 13.14%, representing a decrease of 0.34 percentage points as compared with the end of the previous year. (Note: Nine national joint-stock commercial banks in China refer to China Merchants Bank, CITIC Bank, Industrial Bank, China Everbright Bank, Shanghai Pudong Development Bank, Huaxia Bank, China Guangfa Bank, Ping An Bank and the Company. All data above are based on the statistics of domestic institutions of the Company. According to the Notice on Adjusting the Statistical Standards of Loans and Deposits for Financial Institutions (Yin Fa [2015] No. 14) 《中國人民銀行關於調整金融機構( 存貸款統計口徑的通知》(銀發[2015]14號)) released by the PBOC, with effect from 2015, the deposit-taking financial institutions shall include deposits from and placements with non-deposit-taking financial institutions in “Total Deposits” and “Total Loans”, respectively, for statistical purpose.)

47 V. Qualitative Analysis of Loans

(I) Industry concentration of loans

(Unit: RMB million)

31 December 2018 31 December 2017 Item Amount % of total Amount % of total

Corporate loans and advances Real estate 387,942 12.69 256,127 9.13 Leasing and commercial services 344,669 11.28 275,289 9.82 Manufacturing 305,767 10.00 335,206 11.95 Wholesale and retail 185,485 6.07 221,770 7.91 Mining 117,374 3.84 125,949 4.49 Water, environment and public utilities management 101,924 3.33 89,079 3.18 Construction 94,069 3.08 75,924 2.71 Financial services 85,139 2.79 103,672 3.70 Transportation, storage and postal service 69,469 2.27 81,176 2.89 Production and supply of electric power, heat, gas and water 48,948 1.60 52,021 1.86 Agriculture, forestry, animal husbandry and fishery 13,916 0.46 10,788 0.38 Accommodation and catering 10,079 0.33 7,494 0.27 Public administration, social security and social organisations 7,379 0.24 10,284 0.37 Others 54,041 1.76 53,701 1.91

Subtotal 1,826,201 59.74 1,698,480 60.57

Personal loans and advances 1,230,545 40.26 1,105,827 39.43

Total loans and advances to customers 3,056,746 100.00 2,804,307 100.00

48 (II) Geographical distribution of loans

(Unit: RMB million)

31 December 2018 31 December 2017 Item Amount % of total Amount % of total

Northern China 878,999 28.76 923,083 32.92 Eastern China 955,560 31.26 810,954 28.92 Southern China 488,726 15.99 392,912 14.01 Other regions 733,461 23.99 677,358 24.15

Total 3,056,746 100.00 2,804,307 100.00

Note: For details of the geographical distribution of institutions of the Group, please refer to Note 5 “Segment Information” of the Financial Statements.

(III) Classification and percentage of loans by types of collateral

(Unit: RMB million)

31 December 2018 31 December 2017 Item Amount % of total Amount % of total

Unsecured loans 725,263 23.72 678,023 24.18 Guaranteed loans 627,501 20.53 632,828 22.57 Loans secured by — Tangible assets other than monetary assets 1,307,324 42.77 1,134,722 40.46 — Monetary assets 396,658 12.98 358,734 12.79

Total 3,056,746 100.00 2,804,307 100.00

49 (IV) Top ten loan customers

As at the end of the Reporting Period, the aggregate amount of total loans to the Group’s top ten loan customers were RMB68,553 million, accounting for 2.24% of total loans and advances to customers. The top ten loan customers were as follows:

(Unit: RMB million)

% of total Top ten loan customers Total loans loans

A 9,722 0.32 B 8,373 0.27 C 7,695 0.25 D 7,518 0.25 E 6,822 0.22 F 6,137 0.20 G 6,110 0.20 H 5,436 0.18 I 5,422 0.18 J 5,318 0.17

As at the end of the Reporting Period, the percentages of loans to the single largest loan customer and the top ten loan customers of the Group were as follows:

(Unit: %)

31 December 31 December 31 December Major indicator Benchmark 2018 2017 2016

Percentage of loans to the single largest loan customer ≤10 1.78 2.69 1.64 Percentage of loans to the top ten loan customers ≤50 12.53 12.04 12.21

Notes: 1. Percentage of loans to the single largest loan customer = Total loans to the single largest loan customer/ net capital base.

2. Percentage of loans to the top ten loan customers = Total loans to the top ten loan customers/net capital base.

50 (V) Five-category classification of credit assets

As at the end of the Reporting Period, the NPL ratio of the Group was 1.76%, representing an increase of 0.05 percentage points as compared with the end of the previous year.

(Unit: RMB million)

31 December 2018 31 December 2017 Change Item Amount % of total Amount % of total (%)

Performing loans 3,002,880 98.24 2,756,418 98.29 8.94 Of which: Pass 2,899,509 94.86 2,642,469 94.23 9.73 Special-mentioned 103,371 3.38 113,949 4.06 -9.28 NPLs 53,866 1.76 47,889 1.71 12.48 Of which: Substandard 28,648 0.94 17,048 0.61 68.04 Doubtful 14,199 0.46 21,198 0.76 -33.02 Loss 11,019 0.36 9,643 0.34 14.27

Total 3,056,746 100.00 2,804,307 100.00 9.00

(VI) Migration ratio of loans

The table below sets forth the migration ratio of loans of the Company:

(Unit: %)

31 December 31 December 31 December Item 2018 2017 2016

Pass 3.40 3.62 5.23 Special-mention 21.83 16.95 22.48 Substandard 38.51 46.54 60.97 Doubtful 29.14 18.90 38.81

51 (VII) Restructured loans and overdue loans

As at the end of the Reporting Period, the balance of restructured loans of the Group was RMB18,978 million, representing an increase of RMB4,141 million as compared with the end of the previous year. The percentage of restructured loans to total loans and advances to customers was 0.62%, representing an increase of 0.09 percentage points as compared with the end of the previous year. The balance of overdue loans was RMB79,129 million, representing a decrease of RMB9,988 million as compared with the end of the previous year. The percentage of overdue loans to total loans and advances to customers was 2.59%, representing a decrease of 0.59 percentage points as compared with the end of the previous year.

(Unit: RMB million)

31 December 2018 31 December 2017 Item Amount % of total Amount % of total

Restructured loans 18,978 0.62 14,837 0.53 Overdue loans 79,129 2.59 89,117 3.18

Notes: 1. Restructured loans (full name: loans after restructuring) are loans of which the terms of repayment under the loan agreement have been amended by the Bank as a result of deteriorated financial status of the borrower or inability of the borrower to repay the debt due.

2. Overdue loans are loans of which the repayment of principal or interest is overdue for one or more days.

(VIII) Repossessed assets

(Unit: RMB million)

31 December 2018 31 December 2017 Allowance Allowance for for impairment impairment Item Amount losses Amount losses

Repossessed assets 10,631 80 11,099 85 Of which: Real estate and land use right 7,406 77 10,252 85 Motor vehicles 73 — 186 — Others 3,152 3 661 —

52 (IX) Changes in allowance for impairment losses on loans

(Unit: RMB million)

31 December 31 December Item 2018 2017

Opening balance 85,810 64,394 Charge for/release during the period 43,611 32,180 Write-offs and transfer out during the period -58,421 -22,798 Recoveries 1,914 1,773 Unwinding of discount -947 -832 Exchange gain or loss 241 -198

Ending balance 72,208 74,519

Method for assessing allowance for impairment losses on loans:

According to the International Financial Reporting Standards No. 9 — Financial instrument (IFRS 9) and Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments (Cai Kuai [2017] No.7) 《企業會( 計準則第22號 — 金融工具確認和計量》(財會[2017]7號)), the Company adopted the new accounting standard for financial instruments and used the expected credit loss model to calculate the allowance for impairment losses since 1 January 2018. According to the new standard for financial instruments, for retail loans and non-retail loans in phase 1 and phase 2, the allowance for impairment losses is provided based on risk parameters such as probability of default (PD), loss given default (LGD) estimated by the internal rating system. For non-retail loans in phase 3, the allowance for impairment losses is provided based on the expected recovery of cash flow for each single loan. After the adoption of the new standard, the management of allowance for impairment losses of the Company was more forward-looking and further refined.

53 (X) NPLs and related measures

As at the end of the Reporting Period, the Group had NPL balance of RMB53,866 million, representing an increase of RMB5,977 million, or 12.48%, as compared with the end of the previous year.

1. Industry concentration of NPLs

(Unit: RMB million)

31 December 2018 31 December 2017 Item Amount % of total Amount % of total

Corporate loans and advances Manufacturing 12,352 22.94 12,392 25.89 Wholesale and retail 5,954 11.05 7,031 14.68 Mining 2,549 4.73 2,166 4.52 Financial services 1,356 2.52 15 0.03 Construction 1,225 2.27 788 1.65 Real estate 1,117 2.07 552 1.15 Leasing and commercial services 961 1.78 859 1.79 Transportation, storage and postal service 855 1.59 983 2.05 Agriculture, forestry, animal husbandry and fishery 729 1.35 403 0.84 Production and supply of electric power, heat, gas and water 677 1.26 322 0.67 Accommodation and catering 235 0.44 85 0.18 Others 164 0.30 158 0.33

Subtotal 28,174 52.30 25,754 53.78

Personal loans and advances 25,692 47.70 22,135 46.22

Total 53,866 100.00 47,889 100.00

54 2. Geographical distribution of NPLs

(Unit: RMB million)

31 December 2018 31 December 2017 Item Amount % of total Amount % of total

Northern China 22,972 42.65 19,843 41.43 Eastern China 8,992 16.69 11,053 23.08 Southern China 5,789 10.75 4,433 9.26 Other regions 16,113 29.91 12,560 26.23

Total 53,866 100.00 47,889 100.00

Note: The geographical distribution is in line with the distribution shown in “V. Qualitative Analysis of Loans — (II) Geographical distribution of loans” in this report.

In order to effectively control and ensure stable asset quality in general, the Group mainly adopted the following measures during the Reporting Period:

(1) In line with the national macro-economic industrial and regional policies, the specific policies on supporting the development of real economy and the regulatory requirements, the Company proactively adjusted loan distribution to support the development of real economy and increased the Group’s financing support to NSOEs and small and micro enterprises provided that risks were under control.

(2) The Company continuously improved management policies on asset portfolios by imposing multi-dimensional risk limit management and portfolio management for different industries, customers and products and further optimising asset structure to increase the risk-adjusted return.

(3) The Company strictly controlled risk of new credit facilities by enhancing screening of customers admittance and adopting stricter credit approval criteria in order to mitigate credit risks from the origins.

(4) Risk early-warning and post-loan risk supervision was further enhanced. The Company established a risk early-warning system to realise an automatic and intelligent collecting, analysing and reporting of risk information. A new top- down alert management model of data-driven and active management was set up to further strengthen the risk management of the entire process of credit risk management. Refined and differentiated post-loan management of existing loans was further improved. By adopting regular and differentiated mechanisms for risk monitoring, evaluation and classification, and leveraging on technological upgrading of systems, the Company enhanced the implementation of post-loan management monitoring continued to screen risks in relation to key industries, organisations, customers and products, so as to duly carry out risk prevention in key areas.

55 (5) The Company further strengthened collection and disposal of NPLs. To improve the efficiency of collection and disposal, the Company took a couple of measures including carrying out dedicated collection and disposal activities, enhancing indicator monitoring and formulating differentiated collection and disposal plans for different customers. The Company also adopted comprehensive recovery and disposal measures such as repayment collection, restructuring, transferring, foreclosing, taking legal action and writing-off.

(6) To foster and strengthen the law-abiding operation philosophy, the Company improved governance structure and organisation structure, strengthened the capability of teams, refined rules and regulations, optimised mechanism and procedures, strengthened law enforcement in management of market chaos, enhanced compliance inspection and accountability, tightened appraisal and increased trainings. Remarkable results in preventing and mitigating risks, improving asset quality and promoting compliance operation.

VI. Analysis of Capital Adequacy Ratio

The Group calculated its capital adequacy ratio in accordance with the Capital Rules for Commercial Banks (Provisional) 《商業銀行資本管理辦法( (試行)》) (the “New Rules”) and other relevant regulatory provisions. The calculation of capital adequacy ratio covers the Company and the financial institutions directly or indirectly invested by the Company in accordance with the requirements of the New Rules. As at the end of the Reporting Period, the capital adequacy ratio, core tier-one capital adequacy ratio and tier-one capital adequacy ratio of the Group satisfied the requirements of the New Rules.

56 The table below sets out the capital adequacy ratio of the Group:

(Unit: RMB million)

31 December 2018 Item The Group The Company

Net core tier-one capital 415,726 395,467 Net tier-one capital 426,550 405,345 Total net capital base 547,281 522,139 Core tier-one capital 417,179 403,209 Core tier-one capital deductions -1,453 -7,742 Other tier-one capital 10,824 9,892 Other tier-one capital deductions — -14 Tier-two capital 120,731 116,816 Tier-two capital deductions — -22 Total risk-weighted assets 4,656,286 4,457,739 Of which: Credit risk-weighted assets 4,281,596 4,089,665 Market risk-weighted assets 95,209 99,268 Operational risk-weighted assets 279,481 268,806 Core tier-one capital adequacy ratio (%) 8.93 8.87 Tier-one capital adequacy ratio (%) 9.16 9.09 Capital adequacy ratio (%) 11.75 11.71

Capital instruments entitled for the preferential policy during the transitional period: According to the applicable requirements under the New Rules, non-qualified tier-two capital instruments issued by commercial banks before 12 September 2010 may be entitled to preferential policy of a progressive deduction of book value by 10% per annum starting from 1 January 2013. As at the end of the Reporting Period, the balance of non-qualified tier-two capital instruments of the Company was RMB9.0 billion, which can be put into the calculation.

As at the end of the Reporting Period, net tier-one capital increased by RMB8,518 million, on- and off-balance sheet assets after adjustment increased by RMB12,889 million, while the leverage ratio increased by 0.11 percentage points, as compared with the end of September 2018. The leverage ratio of the Group is as follows:

(Unit: RMB million)

31 December 30 September 30 June 31 March Item 2018 2018 2018 2018

Leverage ratio (%) 6.04 5.93 5.98 5.87 Net tier-one capital 426,550 418,032 403,918 392,207 On- and off-balance sheet assets after adjustment 7,060,882 7,047,993 6,754,419 6,679,422

For details of the regulatory capital, please refer to the section headed “Investor Relations — Announcements and Disclosures — Regulatory Capital” on the Company’s website (www.cmbc.com.cn). 57 VII. Segment Report

In respect of geographical regions, the Group mainly operates its business in four main regions, namely, northern China, eastern China, southern China and other regions. In respect of business lines, the Group provides different types of comprehensive financial services in four major business segments, namely corporate banking, retail banking, treasury and others.

(I) Segment operating results by geographical region

(Unit: RMB million)

Total assets (excluding deferred income tax Operating Profit before Item assets) income income tax

Northern China 4,806,232 67,922 22,769 Eastern China 1,328,486 33,453 14,546 Southern China 623,629 26,084 15,493 Other regions 990,178 26,702 5,977 Inter-segment elimination -1,784,394 — —

Total 5,964,131 154,161 58,785

Note: Inter-segment elimination refers to intra-group transactions of the Group.

(II) Segment operating results by business line

(Unit: RMB million)

Total assets (excluding deferred income tax Operating Profit before Item assets) income income tax

Corporate banking business 1,839,931 66,272 19,932 Retail banking business 1,218,778 56,895 21,858 Treasury business 2,710,197 26,475 16,635 Other businesses 195,225 4,519 360

Total 5,964,131 154,161 58,785

58 VIII. Other Financial Information

(I) Explanation on changes in accounting policies

For details of the changes on the accounting policies of the Company and their effects during the Reporting Period, please refer to Note 2 “Basis of preparation and accounting policies” to the Financial Statements.

(II) Items relating to fair value measurement

1. Internal control system relating to fair value measurement

In order to regulate fair value measurement, improve the quality of financial information, strengthen risk management and protect the legitimate interests of investors and all relevant parties, the Company has formulated the Administrative Measures regarding Fair Value 《公允價值管理辦法》( ) based on the Accounting Standards for Business Enterprises 《企業會計準則》( ), which expanded the scope of fair value measurement to cover the measurement of certain financial assets and financial liabilities; and clarified and refined the principles, methods and procedures for determining fair value. With the aim to enhance the rationality and reliability of the valuation of fair value, the Company has assigned specific working responsibilities to relevant managing departments for fair value management so as to continuously strengthen research on the valuation of its asset and liability businesses and improve internal valuation capabilities. The Company will also gradually optimise and employ the valuation models and systems and strengthen the verification of prices obtained externally. Moreover, the Company has correspondingly implemented internal control measures over the process of fair value measurement, including double-checking on price enquiry and confirmation, and adopting an evaluation procedure on fair value measurement which requires the person in charge and reviewer to sign off in order to give effect to the measurement. Furthermore, the Internal Audit Department supervised and checked the range determined for fair value measurement and measurement methodology and procedure, so as to improve internal control within the Company.

The Company has actively commenced the preparatory work for adoption of the new accounting standards including IFRS 9 — Financial Instruments, and Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments, Accounting Standards for Business Enterprises No. 23 — Transfer of Financial Assets and Accounting Standards for Business Enterprises No. 24 — Hedge Accounting promulgated by the Ministry of Finance. During the Reporting Period, the SPPI test of financial instruments, product classification, valuation, impairment assessment and system upgrading were completed. Fair value measurement have been conducted in accordance with the new accounting standards from 1 January 2018.

59 2. Financial instruments measured at fair value

The Company’s financial instruments at fair value include: financial assets/liabilities at fair value through profit or loss, derivative financial instruments, and financial assets at fair value through other comprehensive income. In particular, the valuation methods of the bond investment were listed as follows: for RMB bonds, in principle the valuation provided by China Central Depository & Clearing Co., Ltd. would apply; for bonds denominated in foreign currencies, market value was determined through a combination of Bloomberg quotes and enquiries. The valuation of most derivative financial instruments was obtained from quotes in the open market and model valuation. In particular, the valuation of derivative instruments in which customers have interests was obtained from market enquiries while the valuation of foreign exchange options was from system model valuation. Derivative financial instruments mainly consisted of interest rate swaps in which customers have interests and proprietary instruments in which market risks had been hedged, including interest rate swaps as well as forwards, swaps and options of precious metals and, foreign exchanges.

(Unit: RMB million)

Fair value Accumulated changes fair value through changes Impairment 1 January profit or loss charged allowance 31 December Item 2018 for the year to equity for the year 2018

Financial assets Of which: Financial assets at fair value through profit or loss 577,388 155 — — 381,093 Loans and advances to customers at fair value through other comprehensive income 89,022 — -583 -332 98,311 Positive fair value of derivatives 18,734 14,213 52 — 33,112 Financial assets at fair value through other comprehensive income 345,207 — -487 -750 461,693

Total 1,030,351 14,368 -1,018 -1,082 974,209

Financial liabilities Of which: Financial liabilities at fair value through profit or loss -3,373 3 — — -987 Negative fair value of derivatives -18,076 76 — — -18,000

Total -21,449 79 — — -18,987

(III) Overdue and outstanding liabilities

As at the end of the Reporting Period, the Group had no material outstanding liabilities that were overdue. 60 IX. Performance of Key Business Lines

(I) Corporate and investment banking

During the Reporting Period, in active response to the new changes and new challenges in market and regulatory environment, the Company captured the crucial opportunities arising from the shift in growth drivers of corporate banking business and adopted reform and business development as two major strategies, so as to promote development through transformation. It also pressed ahead the NSOE strategy, strengthened differentiated management of different customers segments, improved the quality and structure of liabilities and assets, accelerated product innovation and upgrading as well as adopted the capital-effective business development path. As a result, the corporate banking business was continuously expanded with enhancing competitiveness.

1. Corporate customers

During the Reporting Period, adhering to the “customer-centric (以客戶為中心)” service philosophy, the Company refined its diversified and classified service systems for different customer groups and innovative customer service models to provide comprehensive, smart and one-stop services with better customer experience. It is the objective of the Company to be “a bank with best customer experience”. In terms of fundamental customer group, as at the end of the Reporting Period, domestic corporate customers with deposits of the Company increased by 155.1 thousand, or 15.31%, to 1,167.9 thousand as compared with the end of the previous year. The number of domestic customers with outstanding general loan balances of the Company was 9,926. In terms of strategic customers group, in active response to the national policy and in line with the three-year development plan proposed by the Board, the Company strengthened the coordination between the middle and back offices and enhanced supports to NSOEs by providing comprehensive financial solutions under the new “1+3” service model. As at the end of the Reporting Period, the Bank had 354 strategic NSOE customers with daily average deposits and outstanding loans balance of RMB193,263 million and RMB204,910 million, respectively, representing an increase of 8.92% and 12.09%, respectively, as compared with the end of the previous year. For SME customers, the Company built its brand of “SMEs Minsheng Project (中小企業民生工程)” in order to develop itself as a leading bank for SMEs with a digitalised, standardised and procedure- based business model. The Company also promoted its four major projects, namely “Cooperation, Foundation, Win-win and Shimmer (攜手、生根、共贏、螢火)”, in order to provide SMEs with comprehensive financial and non-financial services including payments and settlements, cash management, credit facilities and supply chain services. As at the end of the Reporting Period, the number of SME customers with active accounts amounted to 25,362.

61 2. Corporate deposits

During the Reporting Period, the Company further consolidated its customer base, strengthened the development of its settlement business platform and expanded institutional finance. The Company strengthened marketing along the supply chains of corporate customers with the launch of supply-chain finance and accepted market- oriented deposits, including structured deposit, in line with liquidity and interest rate trends. As a result, steady growth was achieved despite of strict cost control. As at the end of the Reporting Period, total corporate deposits of the Company amounted to RMB2,561,641 million, representing an increase of RMB126,894 million, or 5.21%, as compared with the end of the previous year, ranking among top of joint stock banks.

3. Corporate loans

During the Reporting Period, in compliance with the new changes and trends of national economic development as well as the transformation and upgrading of the industrial and consumption structures, the Company actively developed businesses in the emerging industries and consumption-driven industries with promising prospects and market potential, proactively participated in major infrastructure construction projects concerning key national strategies and new urbanisation, and enhanced supports for national strategies including “Belt and Road Initiative”, “the coordinated development of the Beijing, Tianjin and Hebei region, the Yangtze River Economic Belt as well as “the Guangdong-Hong Kong-Macau Bay Area”. The Company also optimised structure and industrial distribution of credit by restricting loans to industries with overcapacity, such as steel and coal industries, in order to realise the healthy development of asset business. As at the end of the Reporting Period, total corporate loans of the Company amounted to RMB1,822,835 million, among which, general corporate loans was RMB1,726,719 million, increased by RMB108,903 million, or 6.73%, as compared with the end of the previous year. The NPL ratio of corporate loans was 1.54%.

4. Investment banking

During the Reporting Period, the Company efficiently reformed investment banking business framework by adopting new investment banking business models and promoting and optimising the multi-layered investment banking business and product system pillared by four key businesses and two major products, namely bond issuance and securitisation, of capital market. As a result, the transformation of corporate banking business was further facilitated.

During the Reporting Period, in respect of the capital market business of the Company, development has been witnessed in key areas as a fundamental customer base was established and management based on project categories was strengthened.

62 In respect of bond underwriting, the Company strengthened the multi-level business expansion and refined management and the reserve business scale increased significantly. The Company also strengthened risk control and improved overall quality and rating of the projects. During the Reporting Period, the Company underwrote bonds of RMB288,445 million in the interbank bond market and its rank among all lead underwriters in the interbank bond market rose to the ninth.

In respect of asset securitisation, the Company continued to introduce innovative products and successfully launched the first supply chain finance securitisation project in China under the “Belt and Road Initiative” and the PPP asset-backed securitisation project for tertiary education.

5. Transaction banking

During the Reporting Period, the Company focused on the financial demands from daily production and operation of customers and enriched the offering of its three major product lines, namely the international business, settlement and cash management, and domestic trade financing and factoring. It also optimised and improved transaction banking service solutions and provided digitalised, smart and convenient services so as to effectively satisfy diversified financial demands of customers and support the transformation and upgrading of corporate banking business.

The international business maintained sound development with remarkable improvement in market competitiveness. During the Reporting Period, to meet the international financial demands of customers, the Company strengthened the development and integration of innovative products such as “single window” financial services, global cash management and “Minsheng Global Express (民生環球速匯)”. It also actively grasped business opportunities arising in “Going Global”, such as cross-border investment and overseas project contractings, and strove to provide all-around and tailor-to cross-border financial services to “going global” customers as well as customers engaged in imports and exports. Through continuously exploring new business opportunities, total assets denominated in foreign currencies increased significantly, and the volume of cross-border settlements grew.

The Company modified its settlement and cash management business according to changes in customers’ demands and further enriched its product offering. During the Reporting Period, the Company continuously enriched and improved the product systems of “Express (通)”, “Pool (聚)” and “Earnings (盈)”. To meet diversified demands of customers such as E-government and E-commerce, products of the “Express (通)” series integrated basic services including account and payment with the daily operation scenarios and provided tailor-to financial solutions concerning digital transformation and service upgrading for enterprises and governments. The “Pool (聚)” series focused on satisfying the multi-layer domestic and foreign funds management demands of group customers, which had effectively enhanced the service capabilities for group customers. The “Earnings (盈)” series provided enterprises with tailored-to and value-added services for working capital. These products had gained wide market recognition.

63 The Company promoted the transformation of domestic trade finance and factoring business guided them to its original functions. During the Reporting Period, focusing on financial demands including maturity matching, performance of project contracts, property preservation, payment guarantee, financial reports optimisation, trade financing and capital efficiency enhancement, the Company proactively promoted the scenarised upgrading of products such as domestic guarantees, domestic letters of credit and factoring, and continuously innovated business models, which improved services for different customer groups such as strategic customers, supply chain customers, and SMEs. These efforts also helped enhance the Company’s distinctive competitiveness in its trade finance.

The Company continued to upgrade its digitalised services to effectively improve customers’ experience. During the Reporting Period, the Company actively promoted the digitalised and smart upgrading of scenarised products in transaction banking sector. By focusing on the “small-amount, urgent, frequent and fast” financing demands of NSOEs and SMEs, the Company further standardised operation to facilitate online self-service operation of corporate business.

6. Supply chain finance

During the Reporting Period, the Company strategically focused on supply chain finance for reform and transformation. The Supply Chain Finance SBU was established to optimise the system and mechanism of supply chain finance, introduce industry- based solutions, improve product system and set up technology platforms for the application of fintech.

The Supply Chain Finance SBU explored demands from different industries through core enterprises and transaction platforms. With the application of fintech, a new supply chain finance platform was developed to connect all upstream and downstream sectors in the industry chain, which served as a cooperation platform and formed a preliminary ecosystem with the core enterprises. During the Reporting Period, a comprehensive service system of supply chain finance under the brand of “Minsheng E Chain (民生E鏈)” was established, comprising comprehensive financial products and services such as industry-based solutions under the “Express (通)” series, financing products of the “E” series, and settlement and wealth management products.

Industry-based solutions of the “Express (通)” series included the “pharmaceutical express (醫藥通)”, “automobile sales express (車銷通)”, “wine express (佳釀通)”, “home appliance express (家電通)” and “construction express (建工通)”. Based on the characteristics of each industry, the Company helped customers overcome their difficulties in operation by offering tailored-to financial solutions based on product packages and innovative services. Financing products of the “E” series, such as “Credit Sale E (賒銷E)”, “Receivable E (應收E)”, “Procurement E (採購E)” and “Credit Financing E (信融E)”, satisfied a full range of financing needs of various

64 customers. Other comprehensive products and services including supply chain cloud accounts and supply chain cashiers have gained wide market recognition for meeting diversified demands of different customers. As at the end of the Reporting Period, the number of core customers of supply-chain finance of the Company increased by 121.43% as compared with the end of the previous year.

(II) Retail banking

During the Reporting Period, the economic conditions were complicated with greater downward pressure and more uncertainties. Amid the new regulations on asset management, tightening financial regulations and promulgation of policies reducing taxes and surcharges, preferential policies for small business finance continued to emerge. Retail banking faced opportunities and challenges.

During the Reporting Period, the Board of the Company has considered and approved the overall implementation of the Reform Plan and the Three-Year Development Plan. According to the transformation principle of retail banking and to realise the goal of becoming China’s best retail bank, the Company concentrated on customer group management, adhered to NSOE strategy and focused on three core customer bases including NSOE ecosystem, small business and private banking entrepreneurs. The Company will accelerate the development of digitalised, online and scenarised financial services with the application of advanced technology. It also strove to promote rapid, sound and sustainable development of retail banking driven by the development of wealth management and asset management.

During the Reporting Period, the major businesses of retail banking of the Company maintained a relatively fast growth. Operating income from retail banking business of the Company was RMB56,357 million, representing an increase of 17.02% as compared with the corresponding period of the previous year, and accounted for 37.72% of the total operating income of the Company, representing an increase of 2.42 percentage points as compared with the corresponding period of the previous year. Net non-interest income from retail banking was RMB34,702 million, representing an increase of 38.40% as compared with the corresponding period of the previous year, and accounted for 61.58% of income from retail banking and 65.17% of net non-interest income of the Company, representing an increase of 9.52 percentage points and 16.93 percentage points as compared with the corresponding period of the previous year, respectively (calculated based on the non- interest income after the adjustment of the gain from the holding of financial assets at fair value through profit or loss).

During the Reporting Period, in accordance with the strategic plan of reform and transformation, the Company steadily pressed ahead the implementation of various reforms in retail banking, which contributed to the rapid income growth and high-quality development of retail banking.

65 Firstly, the standardised control system of wealth management was established. Under the Phoenix C7+FC model, the Company introduced the “234” reform scheme to optimise the admittance and investment decision mechanisms of wealth management products. During the Reporting Period, intermediary incomes from wealth management, agency sale of funds and agency sale of insurance amounted to RMB3,806 million, RMB788 million and RMB405 million, respectively, representing increases of 29.24%, 64.81% and 109.84%, respectively, as compared with the corresponding period of the previous year. Annual sales of net value wealth management products exceeded RMB500 billion and the balance increased by 43.68 times as compared with the end of the previous year.

Secondly, fruitful results were achieved in customer base management. The number of retail customers with deposits (with daily average of financial assets more than zero on monthly basis) was 38,394.5 thousand, representing an increase of 10.96% as compared with the end of the previous year. The numbers of VIP customers (with daily average of financial assets more than RMB50,000 on monthly basis) and private banking customers were 2,933.0 thousand and 19,250, representing an increase of 12.15% and 16.97%, respectively, as compared with the end of the previous year. The customer base continued to expand steadily with higher growth rate of the number of high-end customers as compared to the number of general customers. Attributable to the significantly enhanced management of existing customers, the retention rate of VIP customers was 74.81%, representing an increase of 1.01 percentage points as compared with the end of the previous year. The growth of financial assets of existing customers improved remarkably as compared with the previous year.

Thirdly, the development relating to small business finance was further enhanced. Strictly comply with the customer segmentation management philosophy under its “Small Business 3.0 (小微3.0)” model, the Company concentrated on the ecosystem consisting of the small business owners, small and micro enterprises (+1), families of the owners and staff and the upstream and downstream enterprises (+N) and strengthened comprehensive distribution and portfolio management of funds, wealth management products, precious metals as well as insurance products. During the Reporting Period, net non-interest income from small business finance increased by 40.27% as compared with the corresponding period of the previous year. The structure of small business customers was further optimised. As at the end of the Reporting Period, outstanding loans balance of small and micro enterprises rated grade 5 or above was 86.25%, representing an increase of 4.92 percentage points as compared with the end of the previous year. The asset quality of new small business customers was outstanding, with NPL ratio and overdue loan ratio of only 0.19% and 0.42%, respectively, since 2016.

Fourthly, the business model of credit card business was transformed progressively by focusing on the core targeted customer group of the millennium generation. The number of new millennial customers accounted for 64.36% of the total number of new customers. The customer acquisition model was transformed with increasing proportion of customers acquisition through online channels. Average cost of acquisition per customer was

66 significantly reduced as a result of the promotion of free official channel as well as low- cost channel via referrals. The Company also encouraged credit card transactions and enhanced customer activity, and the average transaction amount per credit card reached RMB44.6 thousand, maintaining at a leading position in the industry. Net non-interest income for the year amounted to RMB28,073 million, representing an increase of 33.82% as compared to the corresponding period of the previous year.

1. Retail customers

Based on the NSOE strategy, the Company established three distinctive customer groups targeted at NSOE ecosystem, small business and private banking entrepreneurs, and two core customer groups targeted at the wealth management and millennials. With distinguished division of each customer group, the Company is able to precisely allocate resources to develop and improve distinctive targeted financial services for different customer groups so as to gain differentiated competitive advantages.

During the Reporting Period, the Company promoted such customer acquisition channels as product innovation, platform establishment, scenarised applications and coordination between different channels. With the development of a light-capital scenarised financial ecosystem, the Company accelerated effective acquisitions of customers in batch. The Company improved the functions of “Payment Express (繳費通)” to enrich its services, resulting in steady increase of customers. It also established innovative customer acquisition platforms with regional characteristics and based on diversified scenarios such as “a service platform for car owners (車主服務平台)”, “general account for industrial parks (園區一碼通)”, “office building ecosystem (寫字樓生態圈)” and “UnionPay Quick Pass (雲閃付)”. The Company also successfully introduced witness service for account opening in its Hong Kong Branch. The entire account opening process could be conducted online, which further facilitated the establishment of a service platform for targeted “going global” customers. For long-tail customers, the Company made use of technologies such as mobile banking APP, remote banking and other channels, which effectively increased the number of customers acquired online and improve the customers’ experience on service experience. In addition, during the Reporting Period, the Company continued to refine the existing customer acquisition channels and strengthen the synergy between corporate banking and individual businesses for core NSOEs. It launched a marketing activity, “Increase the Payroll (薪上加薪)”, which targeted at customers with agency payroll service of the Company, to promote its payroll service and enhanced cross-selling of credit cards. The Company strengthened the brand promotion by organising a series of “Your Considerate Bank (懂你的銀行)” activities in 2018.

67 2. Financial assets

During the Reporting Period, the Company adhered to the development strategy driven by “wealth management + asset business”. Based on the “234” reform scheme of Phoenix C7 wealth management, the Company established a “C7 + FC” standardised operation system to fully launch the wealth management reform and transformation.

During the Reporting Period, the Company continued to develop innovative deposit products for different customer groups, including the “new deposit for higher interest (新多利)” for new customers, which was a demand deposit product with “honeymoon period (蜜月型)”, new version of “seasonal deposit (季存寶)”, a current savings product for payment and settlement customers, and time deposit product of “flexi- deposits (隨心定)” with daily interest accrual for customers with well-planned use of funds. The Company also optimised the functions of large-amount certificates of deposit by offering monthly interest payment and online transfer services.

During the Reporting Period, the Company actively and quickly responded to market changes and the increasing demands from customers by further enriching its products and offering price comparison service for similar products. The Company put more efforts in the promotion of guarantee products such as critical illness insurance, life insurance and medical insurance as well as medium-and low-risk funds and funds alternative for wealth management products. In respect of wealth management customers, the Company continuously improved the asset portfolio models and provided consistent and professional recommendations on a regular basis with enhanced market analysis and asset allocation capabilities. The Company established a new management model of financial advisers, which implemented standard operation to further enhance the management quality and efficiency of the wealth management team. The Company used big data technology to trace customers’ preference and interest to identify their needs and improve their experiences. The Company continued to carry out the “All Year and Wealth Blossom (然情四季財富綻放)” and “Wealth Management Customers TIBC (財富客戶TIBC)” marketing campaigns to enhance the interactions between customers and the products and services of the Company in order to offer more refined wealth management services.

As at the end of the Reporting Period, financial assets of individual customers under the management of the Company amounted to RMB1,650,120 million, representing an increase of RMB213,760 million as compared with the end of the previous year. Total retail deposits (including the deposits of small and micro enterprises) amounted to RMB650,188 million, representing an increase of RMB99,028 million as compared with the end of the previous year. Among which, savings deposit amounted to RMB565,276 million, representing an increase of RMB83,038 million as compared with the end of the previous year.

68 3. Retail loans

During the Reporting Period, according to changes in economic situation and market environment, the Company optimised the allocation of credit resources with focus on small business finance, credit card business and consumption finance. The Company also increased credit allocations to retail banking business and promoted the restructuring of retail loans under the premise of effective control of risks.

In respect of small business finance, according to the strategic positioning of a bank focusing on small business finance and in active response to national promotion of inclusive finance, the Company supported the development of small and micro enterprises by increasing small business loans. In respect of credit card business, the Company further advanced business development. Focusing on the millennium customers it introduced a brand new slogan, strengthened product innovation as well as improved customer services and market competitiveness. In respect of consumption finance, the Company integrated resources and introduced the “Minsheng Easy Loan (民生民易貸)”. It also accelerated the development of scenarised consumption finance by advancing the exploration and reserve of various potential installment products for decoration, auto insurance, e-commerce consumption and education, so as to better meet the increasing consumption financing needs of individual customers. In respect of housing loans, strictly complied with the real estate regulations of the central and local governments, the Company focused on high-quality housing projects at prime locations and high-quality individual customers and supported the reasonable residential demand for home purchases in accordance with the regulatory policies.

As at the end of the Reporting Period, retail loans of the Company amounted to RMB1,217,894 million, representing an increase of RMB128,976 million as compared with the end of the previous year. Among which, loans to small and micro enterprises increased by RMB47,791 million from the end of the previous year to RMB406,938 million. Consumption loans amounted to RMB417,707 million, representing a decrease of RMB18,045 million as compared with the end of the previous year.

4. Small business finance

During the Reporting Period, according to the national promotion of inclusive finance, the Company continued to strengthen the strategic positioning of small business finance. By promoting the new development path of small business finance and product innovation, improving online services and digitalised management for higher service efficiency, the Company further consolidated customer base, improved comprehensive financial services, realised rapid growth of loans and diversified income sources.

The Company adopted various preferential measures to support small business finance, including favourable price of internal capital transfer and capital cost, additional credit allocations to small business finance as well as increasing amount of loans and number of customers with lower cost. More innovative products and

69 services were introduced, such as the upgraded version of “Cloud Loan (雲快貸)”, and online loan products including “Minsheng value-added loan (民生增值貸)” and “Tax-based online loan (納稅網樂貸)”, which provided more convenient financing services for small business customers. The Company promoted cloud account for small and micro enterprises to solve their difficulties in opening accounts. Business procedures were streamlined to shorten the processing time in order to improve customer experience. The Company also achieved breakthrough in the development of settlement scenario, including the introduction of industry-based application products including “Xiaofutong (校付通)” and “Xianglezu (享樂租)” as well as online management and service platform for payment acquiring of small businesses, which led to simplified and convenient settlement service to customers. Based on social and business circles of small business customers, the Company improved comprehensive financial services by promoting comprehensive portfolio allocation and improving service packages of wealth management products including insurance, funds, wealth management and precious metals. The Company continued to improve the professional levels of its organisations and sales personnel. The Company focused on the development of digital finance and made a couple of breakthroughs in digitalised online business model by launching such technology projects as small business database, exclusive mobile banking services for small business and scenarised marketing support. As such, data and systems provided significant support for business operation and facilitated more convenient, tailored-to and comprehensive financial services to customers. During the Reporting Period, at the tenth anniversary of small business finance, the Company cooperated with renowned media to further promote small business finance including reports on national policies in favour of the development of small and micro enterprises and the outstanding case of small business finance of the Company, as to raise higher attention for small business finance from the public.

5. Credit Card Business

During the Reporting Period, the Company targeted at “millennial customers and took into account of features and preferences of the customer group in brand positioning, product design, choice of business channels and scenarios establishment. In terms of brand positioning, a new brand slogan, “You can always trust us (信任長在)”, was adopted, and various promotion campaigns based on the brand value positioning were launched. In terms of product design, based on the behavioral characteristics and consumption preferences of the millennium generation, popular themed cards such as “Li Yifeng theme card (李易峰主題卡)”, “chinoiserie theme card (中國風主題卡)” and “Minsheng MORE world card (民生MORE世界卡)” were launched with benefits such as cash returns for overseas consumption in the summer time and special offer for fast payment. In terms of application channels, during the Reporting Period, the Group enhanced its customer acquisition capability through selected channels which formed part of the daily life of the millennium generation, such as mobile games and online shops. In terms of business scenarios, the Group focused on developing applications for the millennium generation in order to promote consumption, installment and preferential offers and to acquire new customers. During the Reporting Period, millennial customers gradually became the main contributor to transaction volume and revenues with expanding customer base and increasing proportion in total customers.

70 As at the end of the Reporting Period, the aggregate number of issued credit cards of the Company was 49,547.2 thousand, of which, 10,808.6 thousand were newly issued during the Reporting Period. Transaction volume of credit card business was RMB2,211,625 million, representing an increase of 34.18% as compared with the corresponding period of the previous year. Total account receivable amounted to RMB393,249 million, representing an increase of 33.75% as compared with the end of the previous year. Non-performing asset ratio was 2.15%, representing a slight increase of 0.08 percentage points as compared with the end of the previous year.

During the Reporting Period, the credit card business of the Company was awarded the “Brand with Best Marketing in the Financial Industry for 2018 (2018年金融行業年度傳播力品牌)”, the “The Élan Awards (依蘭獎)” from International Card Manufacturers Association (國際制卡商協會), the “Outstanding Contribution for Cross-border Transactions Award (跨境交易卓越貢獻獎)” from VISA and the “Great Leap Forward Award for the Transaction Quality of UnionPay Credit Cards (銀聯信用卡交易質量飛躍獎)” from China UnionPay. The credit card application of the Company, “Daily Life APP (全民生活APP)”, was awarded the “2018 Award for Top Ten Innovative Financial Products in China (2018年中國十佳金融產品創新獎)” from The Banker.

6. Private banking business

During the Reporting Period, the private banking business of the Company was further reformed with enhanced efficiency as a result of the “three reforms” in respect of the classified customer management system for wealth management, comprehensive services for entrepreneurs and the cooperation between personal and corporate banking businesses, and the product system was in compliance with the new regulations on asset management. All major indicators achieved historical breakthroughs. A solid customer management system was established, and the growth rate of new customers, retention rate of customers and profitability were significantly improved. The number of private banking customers and the amount of financial assets achieved “double-digit” growth, and total revenue growth and structural adjustment also recorded breakthroughs. The customer group structure was further optimised and the sustainability of the business model was secured. To further consolidate the wealth management system, private banking teams and private banking centres were expanded rapidly, cultivating numerous professional teams to support the fast and sound growth of private banking business. Productivity of private banking centres also improved. Cooperation among different sectors was initiated in full speed. Comprehensive services for entrepreneurs became the demonstration sample of the NSOE strategy of the Company, which also diversified the source for acquisition of entrepreneur customers. Private banking products portfolio was further enriched and new products were actively launched to satisfy the wealth management needs of customers. With further improvement in asset allocation, customer scale and sales of products hit record high. The transformation of wealth management business was completed upon the launch of exclusive distribution agency for private banking, and the general asset management capability was significantly improved. There were more options of sophisticated products such as private placement underwriting and high-end insurance,

71 and innovative businesses such as insurance fund trust and the right on financial asset income were launched. The scale of assets of family customers under the management of the Company grew rapidly. Through continuous cooperation with professional overseas organisations, the scale of overseas assets allocated, such as overseas funds and overseas insurance, was enlarged. The Company continuously optimised its sales channel construction with the aid of technologies and enhanced customer experience through targeted marketing with the use of big data, and “mobile finance”.

As at the end of the Reporting Period, the number of eligible private banking customers with financial assets of more than RMB8 million was 19,250, representing an increase of 16.97% as compared with the end of the previous year. The financial assets of eligible private banking customers under the Company’s management was RMB358,286 million.

7. Community finance

In response to the national strategy of promoting inclusive finance, the Company pressed ahead with the business model upgrading of community finance and regulated management of community finance so as to achieve sustainable and healthy operation of community outlets. During the Reporting Period, the community financial capacity of the Company was enhanced significantly. As at the end of the Reporting Period, the Company had 1,347 licensed community branches, and 157 small business sub- branches. Total financial assets of the community (small business) outlets was RMB253,706 million, representing an increase of RMB35,649 million as compared with the end of the previous year, and the average financial assets of the community network were RMB169 million. Total savings was RMB78,732 million, representing an increase of RMB18,788 million as compared with the end of the previous year, mainly due to the increase in saving deposits. The number of customers was 6,267.2 thousand, representing an increase of 478.4 thousand as compared with the end of the previous year, of which 778.6 thousand customers were at or above valid level, representing an increase of 74.7 thousand as compared with the end of the previous year. The customer base was further consolidated.

(III) Treasury business

1. Investment business

During the Reporting Period, the Company continued to optimise the asset structure, enhance its support for real economy and improved the efficiency of investment business. As at the end of the Reporting Period, net investment in trading and banking books of the Company amounted to RMB1,954,382 million, representing a decrease of RMB170,734 million, or 8.03%, as compared with the end of the previous year. The proportion of investment in trading and banking books in total assets of the Company decreased by 3.66 percentage points as compared with the end of the previous year.

72 2. Interbank business

During the Reporting Period, the Company promoted the reform and transformation of interbank business as planned. Dually driven by the customers groups and products, it speeded up the transformation to customer-centric management and operation of customer groups. The Company actively adjusted and optimised the interbank business structure in compliance with the regulatory requirements to achieve the stable and healthy development.

In respect of management of customer groups, the Company adhered to the operation principle of customer-centric approach. It further classified customer segmentations and adopted differentiated marketing management system to different customer groups, formulated marketing guidelines for classified interbank customers and marketing plans for key interbank customers, and effectively strengthened comprehensive and integrated marketing. The Company continuously promote the brand of “Minsheng Interbank Business e+ (民生同業e+)” by participating interbank cooperation summits and interactions with regional customers.

In respect of business development, the Company further stabilised liability management and optimised interbank business structure. As at the end of the Reporting Period, interbank liabilities (including IBNCD) amounted to RMB1,615,690 million, representing a decrease of 8.57% as compared with the end of the previous year. Interbank assets amounted to RMB337,557 million, representing an increase of 38.51% as compared with the end of the previous year. During the Reporting Period, efforts were made to issue more IBNCD. A total of 656 tranches of IBNCD were issued with an accumulated amount of RMB1,109,400 million, representing an increase of 35.58% as compared with the corresponding period of the previous year.

3. Custody business

In respect of asset custody business, the Company actively responded to market changes and took initiatives to capture structural market opportunities including internet platform fund, net-value worth bank wealth management and asset securitisation. Adhering to the principle of “One Minsheng Strategy (一個民生)”, the Company integrated its resources, established customer platforms and organised professional teams. An integrated marketing service system with coordination among the Head Office, branches and sub-branches was established to facilitate targeted marketing, refined management, procedure-based operation and standardised brand building. The asset custody business realised rapid growth. Meanwhile, the Company strove to innovate comprehensive custody business and promote the business transformation by increasing comprehensive value-added services in addition to basic services. As at the end of the Reporting Period, asset under the custody of the Company (including the proceeds of funds supervision) amounted to RMB8,714,750 million, representing an increase of 12.60%, as compared with the end of the previous year. Revenues generated by custody business was RMB4,504 million.

73 In respect of pension business, as a qualified player for the management and custody of corporate annuity account, the Company capitalised on the opportunities in China’s pension market and continued to refine its products and improve operation and services of pension business. The Company provided services of occupational annuity, the second pillar and corporate annuity, and proactively explored the market of the personal pension and the third pillar. Innovative pension business concerning guarantees for after-retirement life was introduced to facilitate rapid growth of pension custody business. As at the end of the Reporting Period, the Company had RMB243,990 million pension funds under custody, representing an increase of RMB158,956 million, or 186.93%, as compared with the end of the previous year, and managed 176.3 thousand personal accounts of corporate annuity.

4. Wealth management business

During the Reporting Period, to cope with unfavourable external environment featuring with economic downturn, continuous deleveraging in the macro-economy, tightening regulations and, intensified competition, under the leadership of the Board and Senior Management, the Company deepened reforms and transformation, optimised business structure and strengthened risk control and compliance for wealth management business according to the new regulatory requirements. In face of the increasing credit risk and market risk and the shrinking profit margin, the product offerings of the Company were transformed into net-value products and the design of new product portfolio was completed in accordance with the new rules. The Company strictly complied with major national strategies and continuously introduced products and services concerning the well-being of the general public and supported the development of real economy with various instruments. A stable and healthy development of asset management business was achieved with effective risk control. As at the end of the Reporting Period, the existing scale of wealth management products of the Company amounted to RMB1,440,555 million.

5. Precious metals and foreign exchange trading

During the Reporting Period, the on-ﬂoor trading volume of gold, including agency sales for legal persons and individuals, of the Company in the precious metals market (i.e., the Shanghai Gold Exchange and the Shanghai Futures Exchange) amounted to 5,058.51 tons, and the trading volume of silver, including agency sales for legal persons and individuals, amounted to 10,720.03 tons. The total trading value amounted to RMB1,369,396 million. In terms of on-ﬂoor gold trading value, the Company was among to top ten dealers at the Shanghai Gold Exchange, and was one of among to top ten dealers at the Shanghai Futures Exchange and was and one of the important domestic importers of block gold trading.

As at the end of the Reporting Period, the Company leased 16.96 tons of gold to its corporate customers, ranking the tenth in the market. During the Reporting Period, the Company sold 1,304 kg physical gold products of its own brand to individual customers. The Company effectively satisﬁed the demands of customers with diversiﬁed products. The outlook of further progress in the market was bright.

74 During the Reporting Period, the transaction volume of domestic spot settlement of the Company amounted to USD509,143 million, representing a decrease of 21.70% as compared with the corresponding period of the previous year. The transaction volume of forward settlement and RMB foreign exchange swap of the Company amounted to USD1,305,826 million, representing an increase of 62.00% as compared with the corresponding period of the previous year. The Company actively introduced innovative products concerning option and its portfolios. The transaction volume of business of RMB foreign exchange option amounted to USD112,308 million, representing an increase of 204.60% as compared with the corresponding period of the previous year.

(IV) Internet finance

During the Reporting Period, sticking to the strategic positioning to become “a fintech- based bank”, the Company actively explored new development model of internet finance by applying cutting-edge fintech to meet the diversified needs of customers. Continuous innovations were made in platforms, products and services in relation to direct bank, retail internet finance, corporate internet finance and online payment, which greatly improved customers’ experience. It also consolidated the Company’s position as one of the top commercial banks in terms of brand influence and market share.

1. Direct bank

During the Reporting Period, the Company upgraded its direct bank and developed the “Cloud + Open-end + Connectors (雲+開放式+鏈接器)” 3.0 model. It launched the first BBC open-ended integrated financial cloud service platform in the industry to provide open-ended, personalised, flexible and efficient financial solutions for the individual customers, B-end enterprises from upstream and downstream enterprises along the industry chain and internet technology companies. Meanwhile, the Company focused on the transformation and upgrading of its business model, innovated customer acquisition approaches and emphasised on scenarised applications. The Company entered into cooperation with various types of enterprises including Ant Financial, JD.com, Huawei, Xiaomi, the three major telecom operators, the two airlines giants and city commercial banks. It became the first direct bank that applied distributed core system and established open-end financial eco-platform, which significantly improved its service and enhanced customer experience. The Company further enriched product offerings by introducing a series of internet financial products including structural deposits, Hui Xuan Bao (慧選寶), Minsheng Hao Che (民生好車) and Minsheng Hao Jie (民生好借). As the first direct bank in China, it was well received by third-party institutions and has won high recognition from the general public during the Reporting Period. The Company won 15 awards in 2018, including “Top 10 direct bank (直銷銀行十強)” by Sina Finance and “Most Outstanding Bank of direct bank (最佳直銷銀行)” by CFCA. The brand recognition and market influence continued to rise. The Company has secured the first place of the business sector for four consecutive years, further consolidating its leading position in internet finance.

75 As at the end of the Reporting Period, total number of direct bank customers was 19,171.3 thousand and financial assets managed by the Company amounted to RMB132,291 million, During the Reporting Period, total transaction amount of direct bank was RMB1.38 trillion with a total of 121 million transactions.

2. Retail internet finance

During the Reporting Period, the Company introduced a new version of mobile bank, which signaled its shift from self-service transaction channel to digital online financial platform through continuous upgrading of financial services for individuals by virtue of fintech. The new version of mobile bank is an integrated App to satisfy all customised demands of various core customer groups such as small and micro enterprises, individuals, credit card and direct bank customers. The Company also introduced “Minsheng Pass (民生通行證)”, an electronic channel for online customer identification and data collection and sharing. Customers can enjoy services of mobile bank, online bank and other platforms with only one set of account and password. The Company introduce new services including remote banking and face identification for bank transfer by continuously applying new technologies. The Bank was among the first batch of banks to support Hua Wei 3D face identification for login in Huawei appliances. During the Reporting Period, the Company introduced online transfer of wealth management products to enhance liquidity, optimised wealth management and deposit functions in the new version of mobile bank by adding 80 insurance products and introduced uniform security tools, which further improved the security system of mobile bank and optimised the retail customers’ experience on online services.

As at the end of the Reporting Period, the number of individual e-banking customers (including individual mobile bank customers and individual internet bank customers) was 47,903.9 thousand, representing an increase of 9,492.0 thousand as compared with the end of the previous year. The number of transactions happened during the Reporting Period was 1,877 million with the transaction amount of RMB16.01 trillion. The activity index of customer transaction maintained among. The top of the banking industry.

3. Corporate internet finance

During the Reporting Period, the Company further optimised corporate internet finance services and expanded cooperation with related platforms. With focus on key industries, the Company developed additional scenarios for online financial services with special features, building up an industry-leading corporate internet financial brand image. The Company further differentiated its services based on the classification of its customer groups. For large-size and core enterprises, the Company introduced corporate internet Bank 2.0 and further optimised the integration of corporate internet bank and the synergy between banks and enterprises. For SMEs, the Company launched distinctive mobile services to meet customers’ demands for fast and convenient financial services. The Company also innovated fund sales manager, which consolidated its first position in the industry.

76 As at the end of the Reporting Period, the Company had signed contracts with 1,161.8 thousand corporate online bank customers. During the Reporting Period, the number of transactions was 99,097.3 thousand and total transaction amount was RMB57.24 trillion. The number of enterprise customers directly connected with bank was 1,580 with average daily deposits of RMB336,159 million.

4. Online payment

During the Reporting Period, focusing on the two core systems of “mobile payment and online acquiring (移動支付+網絡收單)” and strictly adhering to compliance management, the Company further enriched its product offerings and improved services through upgrading products and innovating models, and enhanced influence of “Minsheng Payment® (民生付®)”. The Company launched the pilot mobile easy pay project by upgrading mobile payment and establishing convenient payment scenarios. The Company also promoted innovations in payment applications and introduced industry solutions of “account + payment (賬戶+支付)” for class II/ III customers in support of the development of inclusive finance. The Company optimised online fund collection system and enriched inter-bank fund collection and distribution services by introducing inter-bank gateway payment, bank card payment and mobile QR code payment, improving the comprehensive service and management of business owners. According to the regulatory requirements on settlement and clearance, the Company set up new card-free platforms of online UnionPay and UnionPay and conducted investigations in unlicensed operation to ensure the sustainability and compliance of its business.

As at the end of the Reporting Period, the number of customers using “Kua Hang Tong (跨行通)” of the Company totalled 4,004.4 thousand, and the number of merchandisers using online payment services was 1,275. During the Reporting Period, accumulated transaction amount of Kua Hang Tong (跨行通) recorded RMB230,560 million and total amount of online payment transactions was RMB6.20 trillion.

(V) Overseas business

During the Reporting Period, the Hong Kong Branch actively followed the Company’s development strategy, implemented reform and transformation as well as the three-year development plan and continued to strengthen the three major businesses, namely the corporate banking business, financial markets business and private banking and wealth management business. Serving as an effective overseas business platform of the Company, Hong Kong Branch maintained steady business growth with continuous improvement in efficiency.

Capitalising on the cross-border synergy with the Head Office and grasping the strategic opportunities arising from the “Belt and Road Initiative” and the “Guangdong-Hong Kong- Macau Greater Bay Area”, the Hong Kong Branch focused on providing professional cross-border financial solutions for quality customers targeting at “Going Global” in

77 compliance with the overseas investment policies of China. Hong Kong Branch focused on the capital market, expanded its featured business and intensified cooperation with professional institutions. Cooperation projects with Xiaomi, JD.com, Ctrip.com, China Renaissance and other enterprises with high influence in the industry were successfully launched, which strengthened its services in capital market and new economic sectors. The Company strengthened its ability to play as the leading bank in syndicated loan and undertook a number of syndicated loans projects with high market recognition and significance, including Belle International and China New Higher Education. The ranking of the Company as the leading bank in syndicated loans in Hong Kong and Macau rose significantly. The competitiveness and influence of the Company in the international market were further enhanced.

Capitalising on the strategic position of Hong Kong as an international financial centre, Hong Kong Branch actively expanded its financial markets business. During the Reporting Period, Hong Kong Branch actively developed bond investment and trading and structured notes investment. The investment in the banking book maintained steady growth with rising return rate. The hedging of interest rate risk was effective. As at the end of the Reporting Period, balance of bond investment of Hong Kong Branch was HKD54,668 million. In respect of bond issuance, during the Reporting Period, Hong Kong Branch successfully issued medium-term notes of USD1,000 million. On the other hand, the international ranking of the Hong Kong Branch in terms of underwriting scale of US dollar- denominated bonds issued by Chinese companies was further improved. The number of bond underwriting transactions significantly increased by 92% as compared with the corresponding period of the previous year, reflecting the Company’s brand influence and market position in the overseas bond markets. The new business of financial markets sector was under satisfactory progress and the scale of custody exceeded HKD16,500 million.

During the Reporting Period, individual business of Hong Kong Branch continued to increase rapidly. The individual wealth management of Hong Kong Branch was positioned as an internet-based simplified bank through online bank and mobile bank. Focusing on cross-border wealth management business, Hong Kong Branch targeted to acquire medium and high-end customers and develop as an acquisition and operation platform of medium- and high-end customers of the Company in order to further enhance the cross-border comprehensive financial services. As at the end of the Reporting Period, the number of customers who had opened accounts for personal wealth management exceeded 40,000, total deposits amounted to HKD2,900 million and total balance of financial assets of domestic branches exceeded HKD10,000 million, which was contributed by individual customers of Hong Kong Branch. In respect of private banking business, the sales performance of “Minsheng Insurance (民生保)”, a high-end retail banking product series, was satisfactory. 210 transactions in total were made during the Reporting Period and the total insurance premium of effective policies amounted to HKD3,067 million, which had effectively driven up the number of high-end private banking customers.

During the Reporting Period, net income of the Hong Kong Branch of the Company amounted to HKD1,456 million, representing an increase of 37.88% as compared with the corresponding period of the previous year.

78 (VI) Distribution channels and operating services

1. Physical sales channels

An effective domestic sales network was established by the Company, which extended its business coverage to all provinces in Mainland China with focus on Yangtze River Delta, Pearl River Delta, Bohai Economic Rim and other regions. As at the end of the Reporting Period, the sales network of the Company had covered 125 cities in Mainland China, including 132 branch-level institutions (including 41 tier-one branches, 82 tier-two branches and 9 remote sub-branches), 1,144 business outlets of sub-branches (including business departments), 1,347 community sub-branches, 157 small business sub-branches and 3,410 self-service banks (including on-site and off-site self-service banks), 6,888 self-service machines and 927 remote service equipment.

2. Channel Transformation

The Company concentrated on customers’s experience, promoted innovations in operation models of channels and introduced customer-friendly bank hall, which facilitated the transformation of the bank hall of outlet into an integrated distribution channel offering customer-centric advisory and sales services. As at the end of the Reporting Period, a total of 805 outlets completed the bank hall transformation, accounting for 70.68% of all outlets. The efficiency of outlets was improved significantly.

3. Channel service

In order to maintain the customer experience, the Company monitored the service quality of different channels and optimised monitoring standards in order to improve customer services. During the Reporting Period, the Head Office monitored the service quality of all manual service channels of the Bank, including 1,140 standard outlets, 1,403 multifunctional outlets, 209 off-site remote self-services outlets, “95568 customer service hotline (95568客服)” and credit card customer service. NPS supervision was introduced systematically in order to refine services from customers’ perspective and maintain excellent services across the whole Bank.

In addition to improving service quality, the Company sought to become the “Top 1000 Advanced and Standardised Service Demonstration Units of China’s Banking Industry (中國銀行業文明規範服務千佳示範單位)” in order to develop an outstanding market reputation and image. During the Reporting Period, 25 outlets of the Company were named as the “Top 1000 Advanced and Standardised Service Demonstration Units of China’s Banking Industry (中國銀行業文明規範服務千佳示範單位)” by the China Banking Association.

79 4. Operation management

Adhering to the customer-centric operation philosophy, the Company continued to promote innovation in technologies, business models and services in order to enhance service efficiency and customer experience. Based on the reform requirement of “streamlining administration, delegating power, and improving regulation and services (放管服)”, the corporate account services were improved and upgraded, account opening efficiency and outsourced services through “Cloud account (雲賬戶)” were greatly enhanced. Sharing of external data and the application of automatic processing technology was further promoted with more efficient account opening and improved customers’ experience, which facilitated the setting up as well as development and expansion of small and micro-size enterprises and private enterprises. Taking the initiatives to innovate financial service in the banking industry, the Company was the first to launch “Remote Banking 1.0 (遠程銀行 1.0)”, a new remote financial service model providing customers with all-rounded and user-friendly services online and offline that can be “accessible anywhere and anytime through multimedia. The Company’s “remote banking (遠程銀行)” won the “Remote Banking Brand Award (遠程銀行品牌獎)” by jrj.com.cn in 2018 and the “Outstanding Innovation Award of Remote Banking (傑出遠程銀行創新獎)” by the 16th China Finance and Economics Ranking.

(VII) Major equity investments and management of consolidated financial statements

As at the end of the Reporting Period, the Company had investments in subsidiaries amounting to RMB6,396 million. For details, please refer to the notes to the Financial Statements.

1. Minsheng Financial Leasing

Minsheng Financial Leasing, one of the first five financial leasing companies with banking background approved by the Former CBRC, was established in April 2008. 51.03% equity interest of Minsheng Financial Leasing was held by the Company.

During the Reporting Period, Minsheng Financial Leasing continued its transformation for high quality development with unique features. It promoted the “One Body and Two Wings (一體兩翼)” strategy and comprehensive reform, and strengthened the coordination with the Head Office. Satisfactory results had been achieved. As at the end of the Reporting Period, total assets and net assets of Minsheng Financial Leasing amounted to RMB173,669 million, and RMB17,675 million, respectively.

Firstly, the development pattern was transformed to pursue high quality development with unique characteristics. Minsheng Financial Leasing further reduced the proportion of sale and leaseback and other traditional financial leasing businesses, and expanded the businesses related to the three major strategic segments of aircrafts, ships and vehicles as well as the leasing of real assets. Vehicle assets for the retail segment continued to increase, which further optimised the asset structure and supported the transformation towards high-quality development with unique characteristics.

80 Secondly, the implementation of “One Body and Two Wings (一體兩翼)” was promoted with satisfactory progress. Minsheng Financial Leasing established the three segments of operating lease, financial lease and assets transaction. Operating leases continued to record higher income growth as compared with financial leases and maintained sound development. The assets transaction business also showed a healthy and rapid growth. Satisfactory results had been achieved in the development progress of “One Body and Two Wings (一體兩翼)” with operating lease as the “One Body” and financial lease and asset transaction as the “Two Wings”.

Thirdly, comprehensive reforms were carried out. In order to solve the defectives and achieve its goals, under the guidance of integrated market, professional management and centralised operation, Minsheng Financial Leasing continued its reform in terms of organisation structure, division of responsibilities and positions, procedures optimisation, standardised systems and technological support. The results were remarkable.

Fourthly, risk management was strengthened. Aiming to establish a comprehensive risk management system with the characteristics of Minsheng Financial Leasing, it shifted business focus back to its origin, strengthened management of the leased assets and effectively resisted risks arising from the complicated external market condition.

Fifthly, Minsheng Financial Leasing enhanced the strategic coordination with the Head Office, contributing to the new breakthroughs in the development of “One Minsheng Strategy (一個民生)”. Minsheng Financial Leasing improved the mechanisms for the “coordination with the Head Office (總對總)” including profit distribution and performance appraisal. Through cross-selling of products, the synergy effects on marketing to strategic customers were more effective. The sharing of resources also strengthened its management.

2. Minsheng Royal Fund

Minsheng Royal Fund is a Sino-foreign fund management joint venture company established in November 2008 under the approval of the CSRC. 63.33% equity interest of the Minsheng Royal Fund was held by the Company. It mainly engages in fund raising, fund sales, asset management and other business approved by the CSRC.

As at the end of the Reporting Period, Minsheng Royal Fund had total assets of RMB1,398 million and net assets of RMB920 million. A total of 44 public funds were managed under Minsheng Royal Fund, which covered various types with high, medium and low risks and cross-border products, and consisted of the most comprehensive wealth management, bond and fund product lines in the market. Total value of fund assets under its management was RMB134,100 million. Total value of non-monetary funds under its management was RMB91,300 million, ranking 20th in the industry. The absolute value of non-monetary funds increased by RMB36,200 million, ranking 5th in the industry in terms of the growth of scale. Number of products it managed for special accounts was 52, with a total scale of RMB40,500 million.

81 The investment performance of Minsheng Royal Fund was remarkable. According to the data of Galaxy Securities Fund Research Centre (銀河證券基金研究中心), in 2018, Minsheng Royal Fund ranked 27th out of 92 in terms of the active management capacity for equity investment, which was among the top 29%. It also ranked 8th out of 93 in terms of the active management capacity for debts, which was among the top 9%. Its leading position in the industry was further consolidated. With its consistent outstanding performance, Minsheng Royal Fund was awarded four more Golden Bull awards, namely “2017 Fixed Income Golden Bull Fund Company (2017年固定收益金牛基金公司)”, “2017 Most Trusted Golden Bull Fund Company (2017年最受信賴金牛基金公司)”, “2017 Three-year Open Hybrid Continued Superior Golden Bull Fund (2017年三年期開放式混合型持續優勝金牛基金)” and “2017 Most Popular Fund Manager (2017年最佳人氣基金經理)”. With outstanding mid- and long-term results, Minsheng Royal Fund has won “13 Golden Bull awards (金牛獎)” (known as the Oscar award of the fund management industry) in five years, showing high recognition by the industry on its overall strengths.

Minsheng Royal Fund initiated and established Minsheng Royal Asset Management on 24 January 2013, and currently holds 51% equity interest of Minsheng Royal Asset Management. Minsheng Royal Asset Management’s registered capital was RMB668 million and the scope of business included asset management business for speciﬁc customers and other business permitted by the CSRC. As at the end of the Reporting Period, assets managed by Minsheng Royal Asset Management amounted to RMB103,100 million.

3. CMBC International

CMBC International is a wholly-owned subsidiary of the Company established on 11 February 2015 in Hong Kong with the approval of the Former CBRC. It has a registered capital of HKD3,000 million. CMBC International and its subsidiaries have licenses granted by the SFC to carry out activities of type 1 (dealing in securities), type 2 (dealing in futures contracts), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management). The principle business of CMBC International includes sponsorship of listing in Hong Kong, financial advisory on merger, acquisition and reorganisation, underwriting and issuance of bonds, asset management, securities brokerage, direct investment and structural financing. CMBC International is an important strategic platform for the integrated development and international expansion of the Company and will closely cooperate with the Company so as to offer all-round, diversiﬁed and one-stop ﬁnancial services to the Company’s customers.

As at the end of the Reporting Period, CMBC International had total assets and total liabilities of HKD21,841 million and HKD17,935 million, respectively, representing increase of 41.77% and 39.12%, respectively, as compared with the end of the previous year. Equity attributable to the shareholders of Minsheng Bank amounted to HKD3,096 million (including capital contribution from the Company of HKD1,000 million), representing an increase of 54.57% as compared with the end of the previous year. During the Reporting Period, net profit of CMBC International and net profit

82 attributable to the shareholders of Minsheng Bank amounted to HKD372 million and HKD270 million, respectively, representing increase of 65.33% and 40.63% as compared with the corresponding period of the previous year, respectively.

During the Reporting Period, adhering to the “One Minsheng Strategy (一個民生)”, CMBC International actively promoted the “One Body and Two Wings (一體兩翼)” strategy with structured financing (the main body), promoting the development of investment banking and asset management businesses (the two wings). Two sponsorship and underwriting projects, one sole underwriting project and three financial advisory projects on merger and acquisition and reorganisation were completed. The income contribution from investment banking business, primarily including underwriting and issuance of securities, sponsorship of listing in Hong Kong and financial advisory on merger and acquisition and reorganisation increased significantly and the assets under management recorded a rapid growth. The brand of investment banking services of CMBC International has been well-established. During the Reporting Period, CMBC International was dedicated to enhancing its corporate governance, compliance management and internal control system. The effectiveness of risk prevention and control was enhanced.

4. Minsheng rural banks

Minsheng rural banks collectively refer to the rural banks initiated and established by the Company as a major promoter. As at the end of the Reporting Period, the Company established a total of 29 Minsheng rural banks with 87 business outlets. Total assets amounted to RMB33,469 million. Net asset amounted to RMB3,133 million, outstanding balance of loans amounted to RMB19,024 million and balance of deposits amounted to RMB28,422 million.

During the Reporting Period, the Company adopted measures in compliance with the requirement of the Board to maintain “effective risk control, steady business development and organised internal management”. The Company promoted Minsheng rural banks to follow strategy of vitalising rural areas and develop localised services for the rural areas, agriculture and farmers, small business customers as well as residents in communities. The Company specified its business positioning, explored local markets and improved service quality so as to facilitate sustainable development. Work has also been done to develop Minsheng rural banks as an important platforms to perform the social responsibilities and expand the Company’s brand and service coverage to counties and villages.

The Company strictly complied with the requirements of regulatory policy, earnestly fulfilled the duties and further optimised the management system and mechanism of Minsheng rural banks. The Company continued to improve the technology system of rural banks and strengthen support in management and services to improve corporate governance, risk management, compliance management and team building of rural banks. Capital replenishment of certain rural banks contributed to the healthy and sustainable development of Minsheng rural banks.

83 5. Structured entities consolidated to the financial statements of the Group

Structured entities consolidated to the financial statements of the Group include the issuance, management and/or investment of certain asset management plans and fund products by the Group. As the Group has authority over these structured entities, the Group could exercise control over these entities through rights to variable returns from its involvement with the relevant activities and use of power over these investee entities to affect the amount of the Group’s variable returns.

As at the end of the Reporting Period, total assets of these structured entities were RMB303 million. None of the structured entities has significant impact on the financial statements of the Group.

6. Management of consolidated financial statements

During the Reporting Period, adhering to the strategic positionings as “a bank for NSOEs, a fintech-based bank and a bank of comprehensive services”, the Company strengthened the management of its subsidiaries. The Group has improved the risk management and business coordination and enhanced the comprehensive service ability, and the operation of the Group remained stable.

The Company has established a four-level management system of consolidated ﬁnancial statements, namely Board of Directors and Board of Supervisors, Senior Management, management departments of consolidated financial statements and subsidiaries. They have performed their responsibilities and duties properly. The Board is responsible for the formulation of basic management rules of consolidated financial statements. During the Reporting Period, the Board amended the “Administrative Measures on Consolidated Financial Statements 《併表管理辦法》( )” to improve the performance of the Board and Senior Management. It enhanced the supervision and evaluation on management of consolidated financial statements and implemented relevant remedies required by the Board of Supervisors based on the special investigations. It also conducted special auditings and pressed ahead with the key and difficult tasks of management of consolidated financial statements. Satisfactory progress was achieved. The appraisal on the management of consolidated financial statements was refined, so that the individual performance of the Senior Management was considered in the annual appraisal of subsidiaries. The IT system for the management of consolidated financial statements was upgraded by adding centralised risk limits and risk pre-warning functions, which enhanced the centralised risk management and control of the Group. The senior management performed daily management of consolidated financial statements in terms of finance, capital, risk management, internal control and compliance, business coordination, internal trading and other major aspects, in order to further enhance the effectiveness of the Group’s management.

84 X. Risk Management

The principle of the Company’s risk management is “Creating Value by Managing Risks”. It focuses on the coordinated development of quality, proﬁt and scale. The objective of the risk management of the Company is to enhance its risk management by actively establishing a comprehensive risk management system.

(I) Credit risk

Credit risk is the risk that a borrower or a counterparty defaults in making repayments in a timely manner in full amount for whatever reasons. Under the coordination of the Risk Management Commission of the Company, a platform consisting of risk management strategies, portfolio management and risk quantiﬁcation and measurement tools have been established to control risks and support the strategic business transformation. The risk management system covers the whole process including pre-approval investigation, approval review, post disbursement management, collection and preservation of assets. Credit risks of on- and off-balance sheet items and non-credit business are also strictly controlled. Under the new economic circumstances, the Company will strive to strengthen the initiative and foresight of credit risk management in line with the changes in the macroeconomic and ﬁnancial situation.

During the Reporting Period, the Company proactively took a series of measures to ensure the prudent and healthy development of all business lines, such as tightening the standards for customer admittance, facilitating business restructuring, promoting application of risk measurement tools, innovating the risk management approaches and strengthening asset quality management.

Firstly, the Company promoted structural adjustment with stricter policy guidance and optimised its business structure. The Company formulated and released the “2018 Risk Policy 《( 2018年度風險政策》)”, which covered all kinds of investment and financing businesses of the three business lines, namely corporate banking business, retail banking business and financial markets business. Various benchmarks were added for portfolio management. It set differentiated management objectives and requirements with clear guidance and quantitative indicators. Secondly, the Company adopted the NSOE strategy. At the beginning of the Reporting Period, it commenced the “Dingmin Project (鼎民計劃)” , offering credit evaluation services to actively support the development of NSOEs. The Company also set up a special credit approval team for supply chain finance and a risk control team designated for entrepreneurial customers to secure business development. Thirdly, the Company adopted the small business strategy. While rapidly expanding the scale of small business finance business, the assets quality of new small business customers of the Company was satisfactory, laying a solid foundation for future development. The Company diversified its small business credit product lines with focus on collaterals. Through formulating differentiated operation standards, the business procedures were modified to enhance the approval efficiency. Fourthly, the Company properly coped with the capital market risks. In view of the abnormal fluctuations in capital markets, the Company adhered to the philosophy of value investment and reduced risk exposure through various measures such as reducing principal and leverage ratio.

85 The Company strove to solve problems during its development. Fifthly, the Company enhanced the risk pre-warning system. The “Compass” pre-warning management system for operational risks based on big data technology was widely used in operating units of the Company. The new model of pre-warning management system with synergy between the Head Office and branches was stable. “Tianyan (天眼)”, the pre-warning system of the retail banking business, was launched to establish an active monitoring and pre-warning management system. The Company formulated segmented management strategies and set up a risky customer exit mechanism. Sixthly, the Company strengthened asset quality control through connecting the asset quality management to the individual performance of the Senior Management. The Company also carried out special activities and allocated additional resources for the collection and disposal of major troubled assets of corporate customers. The Company implemented centralised collection for retail customers and streamlined disposal mechanism for NPLs with collaterals. Through strengthening cash collection, centralising allowances and writing off and transferring non-performing assets, the Company effectively maintained stable asset quality. Seventhly, the Company promoted the application and upgrading of risk management tools. Risk management was enhanced with the application of big data, AI and other advanced technologies. Risk measurement results were also applied in credit approval, risk authorisation, credit limit setting, asset impairment and risk report.

(II) Market risk

Market risk refers to the risk of adverse changes in market prices (interest rates, exchange rates, stock prices and commodity prices), inflicting losses in on- and off-balance sheet businesses of commercial banks. The Company managed its interest rate risk, exchange rate risk, stock price risk and commodity price risk in accordance with the regulatory requirements and the rules of the Basel accords. The Company further improved its market risk management system in the areas of quota management, measurement, middle office supervision, stress test and contingency management to cope with the increasingly volatile environment of banking industry.

During the Reporting Period, the Company continued to enhance the proactive management of market risks and pressed ahead with various management tasks progressively. Firstly, the Company guided its subsidiaries to establish a standard and comprehensive risk management mechanism, and promoted market risk management on subsidiaries at group level. Secondly, the market risk management of off-balance sheet business was further enhanced when asset management business shifted its focus to net value products. Thirdly, the measurement of default risk by counterparties of derivatives transactions was promoted through the application and upgrading of market risk measurement tools.

86 (III) Liquidity risk

Liquidity risk refers to the risk of a commercial bank which is unable to obtain sufficient funds in a timely manner or to cope with increase in assets or fulfill debt obligations at reasonable costs despite its solvent position. The targets of the liquidity risk management of the Company were to improve the management and measurement of liquidity risk and to strengthen the abilities to identify, monitor and measure liquidity risk, so that liquidity risk tolerance could remain at a relatively stable level to ensure sufficient liquidity for the development of businesses. The Company also raise core liquidity risk control indicators to ensure that under stress circumstances, sufficient assets of high liquidity were available to be transferred to cash. It also aimed to enhance the capital efficiency with tolerable risk exposure.

During the Reporting Period, the policies concerning liquidity risk management adopted by the Company included the following: Firstly, the Company improved the measurement and monitoring of liquidity risk, and refined the liquidity risk management system across the Company. Secondly, the Company monitored and managed interbank business as well as deposits and loans business in differentiated approaches so as to be well-prepared for the risks resulting from the fluctuations in capital business and deposit and loan business. Thirdly, the Company strengthened its monitoring of changes in monetary policies and analysis of interest rate in the market and enhanced the stress testing on liquidity to modify its risk pre-warning and contingency plan. Fourthly, the Company paid close attention to changes in policies and market, evaluated liquidity risk regularly and made adjustment when necessary.

(IV) Operational risk

Operational risk refers to the risk of loss due to deficient and flawed internal procedures, personnel and IT system or external events. The operational risk of the Company mainly comprises internal and external fraud, employment system, safety of working places, and events related to customers, products and operation, damages of tangible assets and interruption of business.

During the Reporting Period, the Company consolidated the base of operational risk management and implemented various operational risk management measures. Firstly, the Company enhanced the effectiveness of three major operational risk management tools, including internal review of operational risk and control of major business of the Company and management, reporting and regular monitoring of data on major risk indicators, and improvement of quality and efficiency of reporting on operational risk loss data, so as to consolidate the loss database of operational risk. Secondly, the Company refined the outsourcing risk management through revision of management system, strengthened the approval for new projects and the management of outsourcers and conducted inspection and appraisal on management. Thirdly, the Company improved its business continuity management level through optimising system and contingency plan for important businesses and conducting drills relating to the coordination among the Head Office, branches and sub-branches and among departments, which prioritised the risk scenarios where the system is paralysed while recovery means are available.

87 (V) Country risk

Country risk refers to the risk of borrower or debtor in a certain country or region failing or unwilling to repay debts to banking financial institutions, or banking financial institutions suffering from commercial losses in a country or region or incurring other losses due to economic, political and social changes and incidents in such country or region.

During the Reporting Period, the Company continued to strengthen the identification and management of country risk. Firstly, the Company revised China Minsheng Bank Country Risk Management Measures 《中國民生銀行國別風險管理辦法》( ) , which further clarified the duties and procedures of management of country risk. Secondly, the Company issued the rating and quota of country risk during the Reporting Period. Country risk ratings and annual risk quotas of major countries and regions were specified in qualitative and quantitative indicators. Thirdly, the Company implemented standardised management of country risk reserves and promoted the application of country risk reserves to management accounting. Fourthly, the Company supervised country risk every month and monitored the quota control, distribution of country risk exposure and public sentiment in relation to major country risk. Fifthly, the Company conducted special trainings on country risk management, and further strengthened the construction of three lines of defence for country risk. Sixthly, the Company improved the country risk management information system in relation to cross-border business approval and lending process.

(VI) Interest rate risk in banking book

Interest rate risk in banking books refers to the adverse changes in the level of interest rate, term structure and other factors which lead to loss on the economic value and overall revenue of banking books, primarily caused by the mismatch of the maturity profiles and benchmark rates between financial positions and instruments of the banking books as well as embedded options. It can be classified into gap risk, benchmark risk and option risk according to the risk categories.

During the Reporting Period, the Company continued to strengthen the management of interest rate risk in banking book by improving the identification, measurement, monitoring, control and mitigation. Firstly, the Company strengthened research on the money market and predication of interest rate trends, continued to monitor interest rate risk in banking books and improved the management of maturity mismatch and investment duration. Secondly, the Company optimised the asset and liability management system through which the Company regularly monitored the re-pricing of financial positions and instruments upon each maturity. It also measured and analysed interest rate risks in banking book, through repricing gap analysis, duration analysis, scenario analysis and stress testing. Thirdly, pursuant to the new rules of regulatory authorities on interest rate risk, the Company improved its risk management structure of interest rate risk in banking book and refined policy–making framework of risk management, including risk strategies, risk appetite and quota system. It also strengthened management of consolidated financial statements so as to enhance risk control of business units. Fourthly, the Company continuously improved its techniques and methods of model management and further enriched its models to ensure the accuracy of risk measurement.

88 (VII) Reputation risk

Reputation risk of commercial banks refers to the risk of negative evaluation of commercial banks and the overall banking industry by relevant interested parties, the media and the society as a result of the poor operation or management and other actions in breach of the national laws and regulations, social ethical standards or applicable internal rules by the commercial banks or their staff, or due to other external customers or events.

During the Reporting Period, the Company regarded reputation risk management as one of its major tasks for maintaining normal operation and promoting favourable public opinion. It continued to improve the reputation risk management rules and mechanisms and fully implemented the Guidelines for the Management of Reputation Risk of Commercial Banks 《商業銀行聲譽風險管理指引》( ) and the Administrative Measures on Reputation Risk of China Minsheng Bank 《中國民生銀行聲譽風險管理辦法》( ). Through daily management of reputation risk and proper handling of concerning of reputation risk, the Company mitigated and eliminated negative impacts through various methods and minimised losses and negative public influence with active and effective risk prevention. In respect of comprehensive risk management, the Company continued to refine its reputation risk management to develop a favourable public image for the business development of the Company. Firstly, the Company promptly evaluated potential threat of contagion risk to predict potential public opinion risks, deployed special monitoring, and formulated plans in advance. Secondly, the Company actively publicised its contribution to and achievements in reform and innovation, business development, distinctive business, legal compliance and the fulfillment of social responsibility. Thirdly, the Company enhanced multilevel trainings on reputation risk management to consolidate the foundation of management. During the Reporting Period, the public image in general remained stable.

(VIII) Information technology risk

Information technology risk is the operational, legal and reputational risk due to natural factors, human factors, technical flaws and management defects in relation to the application of information technology in a commercial bank.

During the Reporting Period, the Company implemented information technology risk management in all areas, including information technology governance, information system development and maintenance, information safety, business continuity, outsourcing and auditing, and continued to improve the information technology risk management. Firstly, based on its strategy of positioning itself as a fintech-based bank, the Company implement fintech strategy. Adhering to its “data + technology” strategy, the Company implemented mid-to long-term plan for developing information technology and strengthened its digital and intelligent financial services. Secondly, the Company improved its data management, deepened the application of big data and solidified the foundation of big data platform. Through improving quality of data and standardising data, the big data service capability of the Company was strengthened, assisting the Company’s transformation to “data- driven” model. Thirdly, the Company optimised the management and control procedures of operation and maintenance of production system and enriched the functions of platform.

89 The Company centralised the management of operation and maintenance and continued to promote automatic, visualised and intelligent operation and maintenance, so as to facilitate its transformation towards active and intelligent operation and maintenance. Fourthly, the Company strengthened and optimised the information security management system and prevention system. The Company integrated information security products and resources to establish an overall network security defense system and network security awareness platform, so as to safeguard the security and stable operation of network and significant information system. Lastly, the Company improved its management and control of information technology risks through comprehensive information technology risk monitoring and implementing two lines of defense system comprising information technology risk evaluation and special risk evaluation. The Company also enhanced its internal control and compliance system and management structure to refine the monitoring, identification, handling and tracking mechanism of information technology risks.

(IX) Internal Control and Anti-Money Laundering

In respect of internal control and anti-money laundering, the Company further promoted reform and transformation and optimised governance structure, refined organisation structure, consolidated system foundation, strengthened inspection and problem rectification, enhanced accountability, appraisal and evaluation and fostered philosophy of compliance operation and management. All these efforts were aimed to enhance active identification and prevention and control of compliance risk. Firstly, the Company optimised its governance structure by restructuring and strengthening the internal control committee, refining the internal control and compliance organisation structure and improving professional teams. Secondly, the Company improved the fundamental system and standards of internal control and compliance. The Company insisted to maintain compliance with external regulations for internal operation and promoted the setup of management systems. Thirdly, the Company further standardised and improved the professional standards of internal control and compliance inspection. Annual inspection plans and compliance checklist were formulated and implemented to ensure comprehensive compliance inspection covering all major issues and areas regarding business and management. Fourthly, with an aim to further enhance its internal control and compliance, the Company thoroughly rectified the problems found in internal and external inspections. Fifthly, the Company strengthened appraisal, evaluation and accountability of compliance, so as to raise awareness of active compliance and improve management effectiveness. Sixthly, the Company reinforced the management of its employees’ conducts and refined the management and evaluation mechanisms regarding employees’ conducts. Lastly, the Company integrated the compliance culture into its corporate culture, which achieved satisfactory results during the Reporting Period. The core concepts including “the leaders shall be fully responsible for the internal control and compliance (內控合規一把手負總責)”, “everyone shall be responsible for internal control and compliance (內控合規人人有責)”, “compliance creates value (合規創造價值)” and “compliance becomes part of deeply ingrained culture (把守規矩變成習慣)” were formulated.

90 During the Reporting Period, pursuant to the opinions of the State Council on anti-money laundering, anti-terrorism financing and anti-tax avoidance and the new policies regarding anti-money laundering of regulatory authorities, the Company actively shouldered its responsibilities and optimised organisation structure, internal control mechanism, responsibility performance and systems through optimising and improving its anti- money laundering practices, implementating new regulatory policies and cooperating with PBOC in on-site inspections. The anti-money laundering mechanism and internal control and compliance mechanism of the Company and their effectiveness were significantly enhanced. Major initiatives on anti-money laundering were introduced by the Company during the Reporting Period. Firstly, the Company further refined the internal control system regarding anti-money laundering through improving its anti-money laundering mechanism based on the rectification opinions from regulatory inspection for 2017. Secondly, the Company cooperated with the PBOC in the on-site inspection for anti- money laundering at the Head Office for the first time in order to thoroughly review the effectiveness of its anti-money laundering measures. Thirdly, the Company conveyed the message of “anti-Money laundering meeting for financial industry (金融系統反洗錢工作會議)” to the whole Bank and requested all directors, supervisors and Senior Management to perform their duties diligently, so as to enhance the performance of anti-money laundering of Senior Management. Fourthly, the Company implemented identification of beneficiary owners and standardised and improved the due diligence on customers in all aspects. Fifthly, suspicious transaction reports were reviewed and administered by the Head Office of the Company, and the quality of such reports was highly recognised by regulatory authorities. Sixthly, the Company was praised by public security authority and regulatory authority for reporting useful information about suspicious transactions and cooperating with public security authorities in cracking various serious anti-money laundering cases. Seventhly, the Company organised promotion and trainings of anti-money laundering and the theme campaign against anti-money laundering won the first prize of “Golden Camera (金鏡頭)”, a photography award of the Company. Lastly, the Company refined its anti- money laundering system and blacklist management system, and established a system for monitoring transaction supervision and list management covering all customers and all transactions.

During the Reporting Period, no domestic and overseas institutions or staff of the Company were found to have participated in or be involved in any money laundering and terrorist ﬁnancing activities.

91 XI. Prospects and Measures

(I) Competition and development trend of the banking industry

In 2019, the risk of global economic slowdown is expected to increase. The financial cycle will move towards the downward end, and trade protectionism will lead to greater conflicts and uncertainties in major areas. Geopolitics factors may further hinder the global economic recovery. In China, due to pressure from the increasing uncertainties of private investment, the slackening growth of real estate industry chain, the Sino-US trade friction and other negative impacts, the economic growth is expected to slow down, and insufficient demand will be one of the most prominent problems in the general economy as it will affect the pricing system, output level and employment situation to a certain extent. As the infrastructure industry will boost the demand for household consumption and enterprise investments, it will become an important pillar supporting the development of a strong domestic market with stable economic growth. With an aim to “stabilise the aggregate demand (穩定總需求)”, the overall macro economic policies will focus on introducing further countercyclical measures. Proactive fiscal policies, such as further reducing taxes and surcharges and expanding the issuance size of special bonds by local governments, will be pushed forward. In order to maintain a reasonable and sufficient liquidity, steady and moderate monetary policies will be introduced. In anticipation of the possible rate cut, the interest rate in credit market is expected to drop steadily.

Affected by external factors, in 2019, the banking industry will face new opportunities and challenges. In respect of opportunities, firstly, the banking industry in China may still see considerable business opportunities arising from the huge potential investment demand under the development phase. Pursuant to the development strategies to boost domestic demand and promote high-quality economic development, China will exert greater efforts in strengthened areas of weakness in infrastructure projects, science and technology development, environment protection and people’s livelihood through speeding up the construction of trunk passageways and “the last kilometer” infrastructure projects. China will also strongly support the technological upgrading of manufacturing industries and new infrastructure projects, such as artificial intelligence and the Internet of Things. With an aim to promote steady growth of effective investment, China will encourage and standardise the PPP model. The above initiatives will create new business opportunities for the banking industry. Secondly, the government will further encourage household consumption to stimulate the potential purchasing power of residents, which will foster the development of retail banking business. Through optimising the consumption system in various aspects, such as objects of consumption, consumption pattern and environment, consumption ability and expectation, the Chinese government will further explore new growth drivers of consumption, bringing favourable development opportunities to education, child care, elderly care, healthcare, cultural, tourism and other industries related to public benefits. In addition, individual tax reform and the improvement in policies will also support consumption and further stimulate consumption credit and other comprehensive financing demands. Thirdly, as the government strongly supports the development of NSOEs and small and micro enterprises, the business environment has been refined, which will generate new opportunities for banks in relation to small business finance and corporate banking business for NSOEs. Since 2018, the government

92 has introduced a series of initiatives to support NSOEs and small and micro enterprises in resolving their financing problems through various means. The government has also reduced taxes and surcharges, streamlines administration and delegates powers. The business environment of NSOEs and small and micro enterprises have been continuously improving, which facilitates further expansion of the banking industry in addition to improving asset quality. Fourthly, leveraging on better regional coordination, the benefits of economies of scale have been shown. The high-quality development creates strong demands for regional financial service. The coordinated development of Beijing, Tianjin and Hebei, Guangdong-Hong Kong-Macao Greater Bay Area, Yangtze River Delta region and other regions shows distinctive features. With the rapid integration of innovative factors, the new leading industries have developed rapidly and become an important momentum for high-quality development. The future policies will focus on coordinating the development of eastern China, central China and western China, while increasing support will be given to the development of Beijing-Tianjin-Hebei region, Guangdong- Hong Kong-Macao Greater Bay Area, Yangtze River Delta region and other core regions. Driven by the radiant power of core cities and integration of core factors, the development of innovative industries and enterprises and urbanisation have been progressing gradually, creating demands for financial services in different aspects at different levels. Lastly, the tightened financial regulations and accelerated reform in capital market will facilitate the comprehensive and sustainable development of commercial banks. After achieving great progress in tightening supervision, de-leveraging and restoring order, the government will focus on “expanding legitimate channels and eliminating illegal practices (開正門，堵旁門)”. In addition, the objectives of speeding up capital market reform and raising the proportion of direct financing will promote the comprehensive and sustainable development of commercial banks and stimulate the growth of non-interest income.

In respect of challenges, ﬁrstly, the banking industry will be required to adjust its strategies and develop business plans in a timely manner as the traditional growth model of the banking industry will continue to face challenges. The development model of the banking industry will be materially affected by the slow growth of economy, transformation and upgrading structures, interest rate liberalisation, financial disintermediation, emerging of fintech, standardisation of regulation, bi-directional opening and other changes in external environment. Therefore, the banking industry shall pay close attention to the changes in the general development environment in China and overseas and strive to convert itself into a light-capital, diversified and differentiated industry with refined management and advanced technology. Secondly, as the capital constraints have been tightened, strengthening endogenous growth capacity and optimising the functions of capital market are the urgent priorities of the banking industry. Facing challenges brought by increasing capital consumption, tightening regulatory and limited internal and external replenishment channels, it is necessary for the banking industry to make prudent capital planning, alter its growth patterns and have proper capital replenishment plan. Thirdly, as asset quality may be under pressure, the banking industry shall take various measures to enhance its risk prevention and control. At present, the financial sector is exposed to high risks and under the pressure of economic downturn. Therefore, the banking industry is likely to be exposed to huge credit risks. In addition, the banking industry is facing complicated and ever-changing market risks arising from the unstable and fluctuated global financial market, creating greater difficulties in risk management. The banking industry is required to have forward-looking insight and make adjustment in a timely manner. The banking industry is also required to strengthen its internal compliance awareness and risk management that covers all procedures through paying close attention to the changes in traditional high risk and potential risk exposure.

93 (II) Development strategies of the Company

To cope with changes in external conditions and internal development demands, the Company has formulated the Overall Implementation Scheme for Reform and Transformation and the Three-year Development Plan of China Minsheng Bank 《中( 國民生銀行改革轉型暨三年發展規劃整體實施方案》) in order to accelerate the implementation of its reform and transformation. In the coming three years, the Company will be committed to becoming a benchmark bank with distinctive features, increased value and continuous innovation. The Company will also strategically position itself as a bank for NSOEs, a fintech-based bank and a bank of comprehensive services. 2019 is a critical year for the effective implementation of reform and transformation as well as the three-year development plan.

A bank for NSOEs. With its focus on NSOEs and the people, the Company will focus on large-and medium-size high-quality NSOEs core enterprises along the upstream and downstream of the supply chain and small and micro enterprises, and serve as a financial butler of NSOE customers and their senior management with integrated, customised and comprehensive financial services. It will strive to become the host bank and preferred bank of the NSOE customers.

A fintech-based bank. The Company will vigorously develop direct bank, small business online credit and credit card online customer acquisition to strengthen technology finance and secure its leading position in the industry. It will also enhance its scientific and technological capacity so that technology can empower business. The Company will improve its intelligent level in finance service to build China’s internet bank with the best customer experience.

A bank of comprehensive services. The Company will expedite its business layout diversification to cover fields including trust, leasing, fund and asset management and achieve integrated and comprehensive services of the Group. The Company also aims to establish a cross-selling and business coordination system under “One Minsheng” strategy to provide its customers with comprehensive financial services with the integration of commercial, investment and transaction banking and the combination of capital, intelligence and commerce. The Company will prioritise its customers and provide integrated and comprehensive services through the cooperation of front, middle and back offices.

In the implementation of the new three-year plan and the promotion of reform and transformation, the Company will stick to the overall operation strategy of “light-capital, optimised liabilities, adjusted structure, promoted coordination and secured quality” and deploy its three major innovative businesses, three principal businesses and five major business segments based on the core principles of high quality development and efficiency. Its deployment includes strengthening the three primary businesses, namely direct bank, small business finance and investment banking; consolidating the three leading businesses, namely credit card, supply chain finance and asset management; and enhancing the five major business segments, namely corporate finance, retail finance, financial markets, internet finance and comprehensive operation. On the basis of the above deployment,

94 the Company will transform itself into a benchmark bank of the industry principally engaging in a digitalised, light-capital and comprehensive business in addition to traditional business. In addition, greater reform and innovation efforts will be made. With innovative mechanisms and systems of its major management aspects, the Company will be able to revitalise its structure. It will also establish a customer-centric operation and management system and extensively enhance its professional management to facilitate and support the implementation of its business development strategies.

Looking forward, focusing on the three major tasks, namely serving the real economy, preventing and mitigating financial risks and promoting financial reform, the Company will thoroughly study the economic and financial development and market changes, maintain its prudent operation and promote reform and transformation. Through stabilising growth, restructuring business, preventing risks, promoting coordination, optimising mechanism and consolidating foundation, the Company aims to promote its high-quality growth and strengthen its capability to serve real economy.

(III) Potential risks

Firstly, the global economy showed a moderate growth during the Reporting Period. The recovery pace of different sectors varied. Due to negative factors including trade protectionism, the economic growth in China further slowed down. In addition, the structural deleveraging resulted in operation difficulties and tightened liquidity of certain enterprises. Banks scaled down credit expansion and strengthened the monitoring and control on assets quality. Difficulty in collection and disposal of non-performing assets continued to increase. In addition, as the central government has repeatedly urged to enhance the capability of financial industry in serving the real economy, commercial banks will face direct pressures on solving the NSOEs’ and the small and micro enterprises’ difficulties in high cost of financing while prohibiting the loans extension without approval or in violation of standards. Moreover, reducing existing loans in areas such as the capital market, government platform and real estate industry remains a long-term and protracted process which needs to be carried out carefully and progressively. At last, under the pressures on business efficiency and assets quality, banks have to balance the short-term and long-term income while ensuring investors can have their promised income. Banks shall also enhance their sustainability and profitability while controlling the risks in relation to credit, market, operation, liquidity and information technology.

Facing new opportunities and challenges, the Company will insist to putting risk prevention and control as the top priority and striving to eliminate risks as soon as these risks arise. The Company will further enhance its overall comprehensive risk management and promote healthy and orderly development of business from the perspectives of philosophy, mechanism, culture, teams and techniques.

95 Chapter 4 Changes in Share Capital and Information on Shareholders

I. Ordinary Shares

(I) Changes in ordinary shares

(Unit: Share)

31 December 2017 Changes over 31 December 2018 the Reporting Period (+,-) Number of Percentage Number of Number of Percentage shares (%) shares shares (%)

I. Shares subject to restriction on sales — — — — — 1. State-owned shares — — — — — 2. State-owned legal person shares — — — — — 3. Other domestic shares — — — — — Of which: Held by domestic legal person — — — — — Held by domestic natural person — — — — — 4. Foreign investor shares — — — — — Of which: Held by overseas legal person — — — — — Held by overseas natural person — — — — — II. Shares not subject to restriction on sales 36,485,348,752 100.00 +7,297,069,750 43,782,418,502 100.00 1. Ordinary shares in RMB 29,551,769,344 81.00 +5,910,353,869 35,462,123,213 81.00 2. Domestic listed foreign invested shares — — — — — 3. Overseas listed foreign invested shares 6,933,579,408 19.00 +1,386,715,881 8,320,295,289 19.00 4. Others — — — — — III. Total number of ordinary shares 36,485,348,752 100.00 +7,297,069,750 43,782,418,502 100.00

Note: The proposed plan of capital reserve capitalisation for 2017 of the Company was considered and approved at the 2017 annual general meeting, and was completed in July 2018. The Company issued a total of 7,297,069,750 additional shares to A share holders and H share holders whose names appeared on the registers of members as at the record dates in a proportion of 2 shares for every 10 share being held. The total number of ordinary shares of the Company increased from 36,485,348,752 to 43,782,418,502 after the capital reserve capitalisation while the shareholding structure remained unchanged, of which, the total number of ordinary shares in RMB (A share) was 35,462,123,213 and the total number of overseas listed foreign shares (H share) was 8,320,295,289.

(II) Shares subject to restriction on sales and restrictions

During the Reporting Period, no shareholder of the Company held shares subject to selling restriction.

96 II. Sufficiency of Public Float

According to the public information available to the Company and to the knowledge of the Directors, the Company had maintained sufficient public float as stipulated under the Hong Kong Listing Rules during the Reporting Period.

III. Issuance of Shares and Bonds During the Reporting Period

(I) Issuance of securities in the three years immediately before the end of the Reporting Period

Not applicable.

(II) Total number of ordinary shares and changes in shareholding structure

The proposed plan of capital reserve capitalisation for 2017 of the Company was considered and approved at the 2017 annual general meeting and was completed in July 2018. The Company issued a total of 7,297,069,750 additional shares to A share holders and H share holders whose name appeared on the registers of members as at the record dates in a proportion of 2 shares for every 10 shares being held. The total number of ordinary shares of the Company increased from 36,485,348,752 to 43,782,418,502 after the capital reserve capitalisation while the shareholding structure remained unchanged, of which, the total number of ordinary shares in RMB (A share) was 35,462,123,213 and the total number of overseas listed foreign shares (H share) was 8,320,295,289.

(III) Employee shares

During the Reporting Period, the Company had no employee shares.

IV. Issuance of Corporate Financial Bonds, Subordinated Bonds, Hybrid Capital Bonds and Tier-Two Capital Bonds

As at the end of the Reporting Period, the Company had issued, redeemed and settled the following outstanding bonds:

(I) Hybrid Capital Bonds of 2009

Pursuant to the approval by the PBOC in the administrative permit (Yin Shi Chang Xu Zhun Yu Zi [2009] No. 8) (銀市場許准予字[2009]第8號) and the approval by the Former CBRC (Yin Jian Fu [2009] No. 16) (銀監覆[2009]16號), the Company issued a total of RMB5,000 million hybrid capital bonds through public offering in the national interbank bond market on 25 March 2009. As assessed by Dagong International Credit Rating Company Limited, the credit rating of the hybrid capital bonds was AA+. These hybrid capital bonds have a term of 15 years. Subject to the approval by the Former CBRC, the

97 Company might exercise a one-off redemption of all or part of the bonds at par value after the expiry of the 10th year but before the maturity of the bonds. The bonds comprised fixed interest rate bonds and floating interest rate bonds. The fixed interest rate bonds (bond name: 09 Minsheng 01; bond code: 090801), amounting to RMB3,325 million, were issued at an initial interest rate of 5.70% and the interest rate for the remaining five years will increase by 300 BP on top of the initial interest rate applicable to the first 10 years if the Company does not exercise any redemption option. The floating interest rate bonds (bond name: 09 Minsheng 02; bond code: 090802) amounted to RMB1,675 million and the par interest rate per annum was based on the sum of a benchmark interest rate plus a basic spread. The benchmark interest rate was the one-year deposit rate published by the PBOC and the initial basic spread was 3%. If the Company does not exercise the early redemption option, an extra premium of 300 BP will apply to the basic spread on a year-on-year basis from the 11th interest payment year.

According to applicable rules, the proceeds from the issuance of bonds were fully accounted as supplementary capital of the Company. Pursuant to the Capital Rules for Commercial Banks (Provisional) 《商業銀行資本管理辦法( (試行)》) adopted by the Former CBRC on 1 January 2013, the proceeds were accounted as tier-two capital of the Company based on required proportion. The use of the proceeds was as stated in the prospectus.

On 25 March 2018, the prevailing interest of RMB264,900,000 was distributed to the bond investors.

As at the end of the Reporting Period, the balance of the fixed interest rate series and the floating interest rate series of the hybrid capital bonds of China Minsheng Banking Corp., Ltd. of 2009 was RMB3,325 million and RMB1,675 million, respectively. During the Reporting Period, Dagong International Credit Rating Company Limited conducted the annual tracking and rating of the bonds and issued a corresponding report on 19 April 2018 with the bond rating of AA+, which was the same as the previous year. (For details, please refer to www.chinabond.com.cn.)

(II) Subordinated Bonds of 2011

Pursuant to the approval by the Former CBRC (Yin Jian Fu [2010] No. 625) (銀監覆[2010] 第625號) and the approval by the PBOC in the administrative permit (Yin Shi Chang Zhun Yu Zi [2011] No. 64) (銀市場准予字[2011]第64號), the Company issued a total of RMB10,000 million subordinated bonds through public offering in the national interbank bond market on 18 March 2011. As assessed by Dagong International Credit Rating Company Limited, the credit rating of the subordinated bonds was AAA. Two types of subordinated bonds were issued for terms of 10 years and 15 years, respectively. Type I Bonds (bond name: 11 Minsheng 01; bond code: 1108001), having a term of 10 years and amounting to RMB6,000 million, were issued at the nominal interest rate of 5.50% and were early redeemed on 18 March 2016, while Type II Bonds (bond name: 11 Minsheng 02; bond code: 1108002), having a term of 15 years and amounting to RMB4,000 million, were issued at the nominal interest rate of 5.70%. These subordinated bonds granted the issuer a one-off early redemption option, that is, subject to the approval by the Former

98 CBRC, the Company might exercise a one-off redemption of all or part of the bonds at par value after the expiry of the fifth year but before the maturity date of Type I Bonds or after the expiry of the tenth year but before the maturity date of Type II Bonds. The exercise of the early redemption option by the issuer is not subject to the consent of bond holders.

On 18 March 2018, the interest of RMB228,000,000 was distributed to the bond investors.

As at the end of the Reporting Period, the balance of the 15-year subordinated bonds of China Minsheng Banking Corp., Ltd. of 2011 was RMB4,000 million. During the Reporting Period, Dagong International Credit Rating Company Limited conducted the annual tracking and rating of the bonds and issued a corresponding report on 19 April 2018 with the bond rating of AAA, which was the same as the previous year. (For details, please refer to www.chinabond.com.cn.)

(III) Tier-Two Capital Bonds of 2014

Pursuant to the approval by the Former CBRC (Yin Jian Fu [2013] No.570) (銀監覆 [2013]570號) and the approval by the PBOC in the administrative permit (Yin Shi Chang Xu Zhun Yu Zi [2014] No.6) (銀市場許准予字[2014]第 6 號), the Company issued tier- two capital bonds (bond name: 14 Minsheng Tier-Two; bond code: 1428003) with a total amount of RMB20,000 million through public offering in the national interbank bond market on 18 March 2014. As assessed by Dagong International Credit Rating Company Limited, the credit rating of the tier-two capital bonds was AAA. These tier-two capital bonds were issued for a term of 10 years with fixed coupon rate of 6.60%. The interest was payable on an annual basis. The tier-two capital bonds granted the issuer a one-off early redemption option. As long as the capital level of the Company is in compliance with the capital regulation requirements under the Former CBRC upon the exercise of redemption option, the Company may, subject to the approval by the Former CBRC, exercise one-off redemption for all or part of the bonds at par value at the last day of the fifth interest bearing year of the bonds. If the bonds fail to meet the standards of tier-two capital instruments due to changes of regulatory requirements during the term of the bonds, the Company may exercise early redemption option, subject to the prevailing regulatory requirements and approval of the Former CBRC. The exercise of early redemption option by the issuer is not subject to the consent of bond holders.

According to applicable rules, the proceeds from the issuance of bonds were fully accounted as supplementary capital of the Company. Pursuant to the Capital Rules for Commercial Banks (Provisional) (《商業銀行資本管理辦法(試行)》) adopted by the Former CBRC on 1 January 2013, the proceeds from the bonds were fully accounted as tier-two capital of the Company. The use of the proceeds was as stated in the prospectus.

99 On 20 March 2018, the prevailing interest of RMB1,320,000,000 was distributed to the bond investors.

As at the end of the Reporting Period, the balance of the tier-two capital bonds of China Minsheng Banking Corp., Ltd. of 2014 was RMB20,000 million. During the Reporting Period, Dagong International Credit Rating Company Limited conducted the annual tracking and rating of the bonds and issued a corresponding report on 19 April 2018 with the bond rating of AAA, which was the same as the previous year. (For details, please refer to www.chinabond.com.cn.)

(IV) Tier-Two Capital Bonds of 2015

Pursuant to the approval by the Former CBRC (Yin Jian Fu [2015] No.136) (銀監覆[2015] 136 號) and the approval by the PBOC in the administrative permit (Yin Shi Chang Xu Zhun Yu Zi [2015] No.54) (銀市場許准予字[2015]第54號), the Company issued tier- two capital bonds (bond name: 15 Minsheng Tier-Two; bond code: 1528002) with a total amount of RMB20,000 million through public offering in the national interbank bond market on 28 April 2015. As assessed by Dagong International Credit Rating Company Limited, the credit rating of the tier-two capital bonds was AAA. These tier-two capital bonds were issued for a term of 10 years with fixed coupon rate of 5.40%. The interest was paid on an annual basis. The tier-two capital bonds granted the issuer a one-off early redemption option. As long as the capital level of the Company is in compliance with the capital regulation requirements under the Former CBRC upon the exercise of redemption option, the Company may, subject to the approval by the Former CBRC, exercise one-off redemption of all or part of the bonds at par value at last day of the fifth interest bearing year of the bonds. If the bonds fail to meet the standards of tier-two capital instruments due to changes of regulatory requirements during the term of the bonds, the Company may exercise early redemption option, subject to the prevailing regulatory requirements and approval of the Former CBRC. The exercise of early redemption option by the issuer is not subject to the consent of bond holders.

According to applicable rules, the proceeds from the issuance of bonds were fully accounted as supplementary capital of the Company. Pursuant to the Capital Rules for Commercial Banks (Provisional) (《商業銀行資本管理辦法(試行)》) adopted by the Former CBRC on 1 January 2013, the proceeds from the bonds were fully accounted as tier-two capital of the Company. The use of the proceeds was as stated in the prospectus.

On 29 April 2018, the prevailing interest of RMB1,080,000,000 was distributed to the bond investors.

As at the end of the Reporting Period, the balance of the tier-two capital bonds of China Minsheng Banking Corp., Ltd. of 2015 was RMB20,000 million. During the Reporting Period, Dagong International Credit Rating Company Limited conducted the annual tracking and rating of the bonds and issued a corresponding report on 19 April 2018 with the bond rating of AAA, which was the same as the previous year. (For details, please refer to www.chinabond.com.cn.)

100 (V) Tier-Two Capital Bonds of 2016

Pursuant to the approval by the Former CBRC (Yin Jian Fu [2016] No. 119) (銀監覆 [2016]119 號) and the approval by the PBOC in the administrative permit (Yin Shi Chang Xu Zhun Yu Zi [2016] No.116) (銀市場許准予字[2016]第116號), the Company issued tier-two capital bonds (bond name: 16 Minsheng Tier-Two; bond code: 1628014) with a total amount of RMB20,000 million through public offering in the national interbank bond market on 30 August 2016. As assessed by Dagong International Credit Rating Company Limited, the credit rating of the tier-two capital bonds was AAA. These tier-two capital bonds were issued for a term of 10 years with fixed coupon rate of 3.50%. The interest was paid on an annual basis. The tier-two capital bonds granted the issuer a one-off early redemption option. As long as the capital level of the Company is in compliance with the capital regulation requirements under the Former CBRC upon the exercise of redemption option, the Company may, subject to the approval by the Former CBRC, exercise one-off redemption of all or part of the bonds at par value at the last day of the fifth interest bearing year of the bonds. If the bonds fail to meet the standards of tier-two capital instruments due to changes of regulatory requirements during the term of the bonds, the Company may exercise early redemption option, subject to the prevailing regulatory requirements and approval of the Former CBRC. The exercise of early redemption option by the issuer is not subject to the consent of bond holders.

According to applicable rules, the proceeds from the issuance of bonds were fully accounted as supplementary capital of the Company. Pursuant to the Capital Rules for Commercial Banks (Provisional) (《商業銀行資本管理辦法(試行)》) adopted by the Former CBRC on 1 January 2013, the proceeds from the bonds were fully accounted as tier-two capital of the Company. The use of the proceeds was as stated in the prospectus.

On 31 August 2018, the prevailing interest of RMB700,000,000 was distributed to the bond investors.

As at the end of the Reporting Period, the balance of the tier-two capital bonds of China Minsheng Banking Corp., Ltd. of 2016 was RMB20,000 million. During the Reporting Period, Dagong International Credit Rating Company Limited conducted the annual tracking and rating of the bonds and issued a corresponding report on 19 April 2018 with the bond rating of AAA, which was the same as the previous year. (For details, please refer to www.chinabond.com.cn.)

(VI) Financial Bonds of 2016

Pursuant to the approval by the Former CBRC (Yin Jian Fu [2015] No.683) (銀監覆 [2015]683號) and the approval by the PBOC in the administrative permit (Yin Shi Chang Xu Zhun Yu Zi [2016] No.161) (銀市場許准予字[2016]第161號), the Company issued the first installment of financial bonds (bond name: 16 Minsheng Bank 01; bond code: 1628017) with a total amount of RMB20,000 million through public offering in the national interbank bond market on 27 October 2016. As assessed by Dagong International Credit Rating Company Limited, the credit rating of the financial bonds was AAA. These financial capital bonds were issued for a term of three years with fixed coupon rate of 2.95%. The

101 interest was paid on an annual basis. According to applicable rules, the proceeds from the bonds were used for loan extension, including, but not limited to, loans to certain small and micro enterprises and agricultural loans. The use of the proceeds was as stated in the prospectus.

On 28 October 2018, the prevailing interest of RMB590,000,000 was distributed to the bond investors.

As at the end of the Reporting Period, the balance of the first installment of the financial bonds of China Minsheng Banking Corp., Ltd. of 2016 was RMB20,000 million. During the Reporting Period, Dagong International Credit Rating Company Limited conducted the annual tracking and rating of the bonds and issued a corresponding report on 19 April 2018 with the bond rating of AAA, which was the same as the previous year. (For details, please refer to www.chinabond.com.cn.)

(VII) Financial Bonds of 2017

Pursuant to the approval by the Former CBRC (Yin Jian Fu [2015] No. 683)(銀監覆 [2015]683號) and the approval by the PBOC in the administrative permit (Yin Shi Chang Xu Zhun Yu Zi [2016] No.161) (銀市場許准予字[2016]第161號), the Company issued the financial bonds (bond name: 17 Minsheng Bank 01; bond code: 1728004) with a total amount of RMB30,000 million through public offering in the national interbank bond market on 7 March 2017. As assessed by Dagong International Credit Rating Company Limited, the credit rating of the financial bonds was AAA. These financial capital bonds were issued for a term of three years with fixed coupon rate of 4.00%. The interest was paid on an annual basis.

According to applicable rules, the proceeds from the issuance of bonds were used for loan extension, including, but not limited to, loans to certain small and micro enterprises and agricultural loans. The use of the proceeds was as stated in the prospectus.

On 9 March 2018, the prevailing interest of RMB1,200,000,000 was distributed to the bond investors.

As at the end of the Reporting Period, the balance of the first installment of the financial bonds of China Minsheng Banking Corp., Ltd. of 2017 was RMB30,000 million. During the Reporting Period, Dagong International Credit Rating Company Limited conducted the annual tracking and rating of the bonds and issued a corresponding report on 19 April 2018 with the bond rating of AAA, which was the same as the previous year. For details, please refer to www.chinabond.com.cn.

(VIII) Tier-Two Capital Bonds of 2017

Pursuant to the approval by the Former CBRC (Yin Jian Fu [2017] No. 178) (銀監覆 [2017]178號) and the approval by the PBOC in the administrative permit (Yin Shi Chang Xu Zhun Yu Zi [2017] No.140) (銀市場許准予字[2017]第140號), the Company issued the first installment of tier-two capital bonds of China Minsheng Banking Corp., Ltd. of 2017 (bond name: 17 Minsheng Tier-Two 01; bond code: 1728016) and the second installment

102 of tier-two capital bonds of China Minsheng Banking Corp., Ltd. of 2017 (bond name: 17 Minsheng Tier-Two 02; bond code: 1728023) through public offering in the national interbank bond market on 12 September 2017 and 27 November 2017, respectively. As assessed by Dagong International Credit Rating Company Limited, the credit rating of the two installments of tier-two capital bonds was AAA. The two installments of tier- two capital bonds were issued for a term of 10 years with fixed coupon rate of 4.70%. The interest was paid on an annual basis. The two installments of tier-two capital bonds granted the issuer a one-off early redemption option. As long as the capital level of the Company is in compliance with the capital regulation requirements under the Former CBRC upon the exercise of redemption option, the Company may, subject to the approval by the Former CBRC, exercise one-off redemption of all or part of the bonds at par value at the last day of the fifth interest bearing year of the bonds. If the bonds fail to meet the standards of tier-two capital instruments due to changes of regulatory requirements during the term of the bonds, the Company may exercise early redemption option, subject to the prevailing regulatory requirements and approval of the Former CBRC. The exercise of early redemption option by the issuer is not subject to the consent of bond holders.

According to applicable rules, the proceeds from the issuance of bonds were fully accounted as supplementary capital of the Company. Pursuant to the Capital Rules for Commercial Banks (Provisional) 《商業銀行資本管理辦法( (試行)》) adopted by the Former CBRC on 1 January 2013, the proceeds from the issuance of the two installments of bonds were fully accounted as tier-two capital of the Company. The use of the proceeds was as stated in the prospectus.

On 14 September 2018, the prevailing interest of RMB705,000,000 was distributed to the investors of the first installment of bonds. On 29 November 2018, the prevailing interest of RMB705,000,000 was distributed to the investors of the second installment of bonds.

As at the end of the Reporting Period, the balance of the first installment and second installment of tier-two capital bonds of China Minsheng Banking Corp., Ltd. of 2017 was RMB30,000 million. During the Reporting Period, Dagong International Credit Rating Company Limited conducted the annual tracking and rating of the bonds and issued a corresponding report on 19 April 2018 with the bond rating of AAA, which was the same as the previous year. (For details, please refer to www.chinabond.com.cn.)

(IX) Special Financial Bonds for Small and Micro Enterprises of 2018

Pursuant to the approval by the CBIRC (Yin Bao Jian Fu [2018] No.189) (銀保監覆 [2018]189號) and the approval by the PBoC in the administrative permit (Yin Shi Chang Xu Zhun Yu Zi [2018] No.211) (銀市場許准予字[2018]第211號), the Company issued the first and second installments of special financial bonds for small and micro enterprises with a total amount of RMB60,000 million through public offering in the national interbank bond market on 22 November and 14 December 2018, respectively. As assessed by Dagong International Credit Rating Company Limited, the credit ratings of the two installments of financial bonds were AAA. The first installment of the financial bonds of China Minsheng Bank of 2018 (bond name: 18 Minsheng 01; bond code: 1828016), amounting to RMB40,000 million, was issued on 22 November 2018 for a term of three years with fixed coupon rate of 3.83%. The interest was payable on an annual basis. The second installment

103 of the financial bonds of China Minsheng Bank of 2018 (bond name: 18 Minsheng 02; bond code: 1828020), amounting to RMB20,000 million, was issued on 14 December 2018 for a term of three years with fixed coupon rate of 3.76%. The interest was payable on an annual basis.

The proceeds from the issuance of RMB60,000 million special financial bonds for small and micro enterprises were specifically used for the extension of loans to small and micro enterprises. The use of the proceeds was as stated in the prospectus.

As at the end of the Reporting Period, the balance of the special financial bonds for small and micro enterprises of 2018 was RMB60,000 million.

V. Information on Preference Shares in the Three Years Immediately Before the End of the Reporting Period

(I) Issuance and listing of offshore preference shares

Pursuant to the approval by the Former CBRC (Yin Jian Fu [2016] No.168) (銀監覆 [2016]168號) and the approval by the CSRC (Zheng Jian Xu Ke [2016] No.2971) (證監許可[2016]2971號), the Company issued non-cumulative perpetual preference shares (preference share name: CMBC 16USDPREF; code: 04609) in the amount of USD1,439 million on 14 December 2016 through a private offering in the overseas market in order to improve its capital structure, provide capital support for the efficient implementation of its strategies, enhance its capital adequacy ratio and strengthen its sustainable development capacity. The offshore preference shares were listed on the SEHK on 15 December 2016 with a nominal value of RMB100 per share at an offering price of USD20 per share. The total number of shares issued was 71,950,000, all of which were issued and fully paid in US dollar.

Based on the Renminbi central parity rate against US dollar published by China Foreign Exchange Trading Centre on 14 December 2016, the gross proceeds from the offering of the offshore preference shares were approximately RMB9,933 million. The net proceeds raised from the offshore preference shares issuance were approximately RMB9,892 million, after deduction of the issuance expenses, which will be used to replenish the additional tier- one capital of the Company.

For the issuance terms of the offshore preference shares, please refer to the announcements of the Company published on the website of the SSE, the HKEXnews website of the SEHK and the website of the Company.

(II) Number of holder of offshore preference shares and particulars of shareholding

As at the end of the Reporting Period, the number of holder of offshore preference shares was one. As at the end of the month prior to the disclosure date of this Annual Report for the year (i.e. 28 February 2019), the number of holder of offshore preference shares of the Company was one.

104 Particulars of shareholding of the top 10 holder(s) of preference shares (or nominees) of the Company are set out as follows (the following data were based on the registered holders of the preference shares as at 31 December 2018):

(Unit: Share)

Number of shares Number of Changes over Shareholding subject to shares Name of Type of Class of the Reporting percentage Number of restriction pledged or shareholder shareholder share Period (%) shares held held locked-up

The Bank of Overseas Offshore — 100 71,950,000 — Unknown New York legal preference Mellon person shares Depository (Nominees) Limited

Notes:

1. The number of shares held by the preference shareholder was recorded in accordance with the register of holders of preference shares of the Company;

2. As the preference shares were issued through private offering in overseas market, information of nominees of the allotted investors were based on the register of holders of the preference shares;

3. The Company does not know if there is any related relationship or concerted action among the above holder of preference shares and the top 10 shareholders of ordinary shares.

(III) Changes in offshore preference shares

(Unit: Share)

Offshore preference Offshore preference shares Class of offshore shares issued as of Changes over the issued as of 31 December preference shares 31 December 2017 Reporting Period 2018

USD preference shares 71,950,000 — 71,950,000

(IV) Profit distribution of preference shares

The dividend of the offshore preference shares of the Company was payable in cash on an annual basis. Any fraction of dividends not paid to holders of preference shares will not be accumulated to the following dividend year. The holders of preference shares will receive dividends at the agreed coupon rate, and they shall not be entitled to participate in the distribution of remaining profit with ordinary share holders. Pursuant to the resolution and authorisation passed at the first extraordinary general meeting for 2016, the first A share class meeting for 2016 and the first H share class meeting for 2016, the profit distribution plan for the offshore preference shares was considered and approved at the 12th meeting of the seventh session of the Board on 30 October 2018. According to the term of the issuance of the offshore preference shares, the Company distributed dividends of USD79,145,000 (tax inclusive) to the holders of offshore preference shares of the Company 105 whose name appeared on the register of members on the record date on 14 December 2018. The aforementioned dividends for the offshore preference shares amount to approximately RMB551 million (tax inclusive). According to relevant PRC laws and regulations, when the Company distributes dividends for the offshore preference shares, it shall withhold and pay income tax at the rate of 10%. According to the relevant requirements of the terms and conditions of the offshore preference shares of the Company, the Company shall bear such tax, in addition to the dividends for the offshore preference shares.

For details of the distribution of dividends for the offshore preference shares, please refer to the announcements of the Company published on the website of the SSE, the HKEXnews website of the SEHK and the website of the Company.

(V) Other information on the preference shares

During the Reporting Period, no preference shares of the Company have been repurchased, converted into ordinary shares nor have their voting rights restored.

According to the requirements promulgated by the Ministry of Finance, such as the Accounting Standards for Business Enterprises No.37 — Presentation of Financial Instruments 《企業會計準則第( 37號 — 金融工具列報》) and the Provisions on Differentiating Financial Debt and Equity Instruments and Related Accounting Treatment 《金融負債與權益工具的區分及相關會計處理規定》( ), there was no need for the issued and existing preference shares of the Company to be settled through delivery of cash or other financial assets or exchange of financial assets or financial liabilities. In the future, the Company will have no obligation to deliver a variable quantity of its equity instruments. The issued and existing preference shares of the Company were accounted for as other equity instruments.

The capital reserve for 2017 of the Company was capitalised by issuing shares to holders of A shares and holders of H shares on 6 July 2018 and 27 July 2018, respectively. The conversion price of offshore preference shares was adjusted from HKD7.56 per H share to HKD6.30 per H share in accordance with the relevant requirements of the compulsory conversion clause of the offshore preference shares with effect from 27 July 2018. In addition, based on the adjustment formula of the conversion price of the domestic preference shares, the conversion price of the proposed domestic preference shares of the Company will be adjusted from RMB8.79 per A share to RMB7.33 per A share. For details of the adjustment on the conversion prices of the offshore preference shares and the domestic preference shares, please refer to the announcement of the Company dated 27 July 2018 published on the website of the SSE, the HKEXnews website of the SEHK and the website of the Company.

106 VI. Shareholders

(I) The table below sets out the top 10 shareholders of the Company and their shareholdings:

(Unit: Share)

Total number of ordinary share holders at the end of the Reporting Period 389,603 Total number of ordinary share holders at the end of the month immediately prior to the disclosure of the Annual Report 386,299 Particulars of shareholding of the top 10 ordinary shareholders

Number of shares held Changes Number of Shareholding as at the end over the shares held Number of Type of percentage of the Reporting Reporting subject to shares Name of shareholder shareholder (%) Period Period restriction pledged

HKSCC Nominees Others 18.92 8,282,868,954 1,383,255,784 — Unknown Limited Anbang Life Insurance Domestic legal 10.30 4,508,984,567 4,506,985,061 — Nil Co., Ltd. person — Conservative Investment Portfolio Anbang Life Insurance Domestic legal 6.49 2,843,300,122 473,883,354 — Nil Co., Ltd. person — Steady Investment Portfolio China Oceanwide Domestic non- 4.61 2,019,182,618 336,530,436 — 2,015,582,617 Holdings Group state-owned Co., Ltd. legal person New Hope Liuhe Domestic non- 4.18 1,828,327,362 304,721,227 — Nil Investment Co., Ltd. state-owned legal person Shanghai Giant Lifetech Domestic non- 3.15 1,379,679,587 229,946,598 — 1,379,678,400 Co., Ltd. state-owned legal person Huaxia Life Insurance Domestic non- 3.14 1,375,763,341 229,293,890 — Nil Co., Ltd. state-owned — Universal legal person Insurance Product China Shipowners Domestic non- 3.00 1,314,284,476 227,367,070 — Nil Mutual Assurance state-owned Association legal person Orient Group Domestic non- 2.92 1,280,117,123 213,352,854 — 1,279,999,488 Incorporation state-owned legal person China Securities Finance Domestic legal 2.87 1,254,418,908 -480,232,928 — Nil Corporation Limited person

107 Shareholding of top 10 holders of ordinary shares not subject to restriction on sales

Number of shares held not subject to restriction Name of shareholder on sales Class of shares

HKSCC Nominees Limited 8,282,868,954 H shares Anbang Life Insurance Co., Ltd. 4,508,984,567 A shares — Conservative Investment Portfolio Anbang Life Insurance Co., Ltd. 2,843,300,122 A shares — Steady Investment Portfolio China Oceanwide Holdings Group Co., Ltd. 2,019,182,618 A shares New Hope Liuhe Investment Co., Ltd. 1,828,327,362 A shares Shanghai Giant Lifetech Co., Ltd. 1,379,679,587 A shares Huaxia Life Insurance Co., Ltd. 1,375,763,341 A shares — Universal Insurance Product China Shipowners Mutual Assurance Association 1,314,284,476 A shares Orient Group Incorporation 1,280,117,123 A shares China Securities Finance Corporation Limited 1,254,418,908 A shares Statement on the related Orient Group Incorporation and Huaxia Life Insurance Co., Ltd. had entered relationship or into an acting in concert agreement. The Company is not aware of any related concerted actions among the relationship among shareholders save as mentioned above. aforesaid shareholders

Notes:

1. The number of shares held by holders of H shares was recorded in the Register of Members as kept by the H Share Registrar of the Company;

2. HKSCC Nominees Limited acted as an agent, representing the total amount of H shares held by all institutional and individual investors that registered in the account of such investors as at 31 December 2018.

108 (II) Substantial shareholders’ and other persons’ interests or short positions in the shares and underlying shares of the Company under Hong Kong laws and regulations

As at 31 December 2018, the following persons (other than the Directors, Supervisors and chief executives of the Company) had the following interests or short position in the shares of the Company as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO and as the Company is aware of:

Percentage of Percentage of Name of Class Long/ the relevant all the issued substantial of short Number of shares in ordinary shareholder shares position Capacity shares Notes issue (%) shares (%)

Anbang Life A Long Beneficial owner 7,352,284,689 1 20.73 16.79 Insurance Co., Ltd.

Anbang A Long Interest held by the 7,352,284,689 1 20.73 16.79 Insurance corporation(s) controlled Group Co., by this substantial Ltd. shareholder

H Long Interest held by the 457,930,200 2 5.50 1.05 corporation(s) controlled by this substantial shareholder

Orient Group A Long Party to the acting in 3,048,721,959 3 8.60 6.96 Co., Ltd. concert agreement

Orient Group A Long Party to the acting in 3,048,721,959* 3 8.60 6.96 Incorporation concert agreement

Huaxia Life A Long Party to the acting in 3,048,721,959* 3 8.60 6.96 Insurance concert agreement Co., Ltd.

China A Long Beneficial owner 2,019,182,618 4 and 5 5.69 4.61 Oceanwide Holdings Group Co., Ltd.

Oceanwide A Long Interest held by the 2,019,182,618 4 and 5 5.69 4.61 Group Co., corporation(s) controlled Ltd. by this substantial shareholder

Tohigh A Long Interest held by the 2,019,182,618 4 and 5 5.69 4.61 Holdings Co., corporation(s) controlled Ltd. by this substantial shareholder

New Hope A Long Interest held by the 1,930,715,189* 6 and 9 5.44 4.41 Group Co., corporation(s) controlled Ltd. by this substantial shareholder

109 Percentage of Percentage of Name of Class Long/ the relevant all the issued substantial of short Number of shares in ordinary shareholder shares position Capacity shares Notes issue (%) shares (%)

New Hope A Long Interest held by the 1,828,327,362* 6 5.16 4.18 Liuhe Co., corporation(s) controlled Ltd. by this substantial shareholder

New Hope A Long Beneficial owner 1,828,327,362* 6 5.16 4.18 Liuhe Investment Co., Ltd.

Li Wei A Long Interest held by the 1,930,715,189* 7 and 9 5.44 4.41 corporation(s) controlled by the spouse of this substantial shareholder

Liu Chang A Long Interest held by the 1,930,715,189* 8 and 9 5.44 4.41 corporation(s) controlled by this substantial shareholder

Oceanwide H Long Beneficial owner 604,300,950 International Equity Investment Limited

Long Interest held by the 408,000,000 corporation(s) controlled by this substantial shareholder

1,012,300,950 10 12.17 2.31

Shi Jing H Long Person who set up a 798,024,133 11 and 12 9.59 1.82 discretionary trust

Abhaya H Long Interest held by the 798,024,133 11 and 12 9.59 1.82 Limited corporation(s) controlled by this substantial shareholder

Wickhams H Long Trustee 798,024,133 11 and 12 9.59 1.82 Cay Trust Company Limited

Divine H Long Interest held by the 713,501,653 11 8.58 1.63 Celestial corporation(s) controlled Limited by this substantial shareholder

JH H Long Beneficial owner 713,501,653 11 8.58 1.63 International Investment Company Limited

110 Percentage of Percentage of Name of Class Long/ the relevant all the issued substantial of short Number of shares in ordinary shareholder shares position Capacity shares Notes issue (%) shares (%)

Guotai Junan H Long Interest held by the 703,204,200 13 and 14 8.45 1.61 International corporation(s) controlled Holdings by this substantial Limited shareholder

Short Interest held by the 703,203,853 13 and 14 8.45 1.61 corporation(s) controlled by this substantial shareholder

Guotai Junan H Long Interest held by the 703,204,200 13 and 14 8.45 1.61 Securities corporation(s) controlled Co., Ltd. by this substantial shareholder

Short Interest held by the 703,203,853 13 and 14 8.45 1.61 corporation(s) controlled by this substantial shareholder

Shanghai H Long Interest held by the 703,204,200 13 and 14 8.45 1.61 International corporation(s) controlled Group Co., by this substantial Ltd. shareholder

Short Interest held by the 703,203,853 13 and 14 8.45 1.61 corporation(s) controlled by this substantial shareholder

Anbang H Long Beneficial owner 457,930,200 2 5.50 1.05 Property and Casualty Insurance Co., Ltd.

BlackRock, H Long Interest held by the 435,882,321 15 5.24 1.00 Inc. corporation(s) controlled by this substantial shareholder

Short Interest held by the 5,954,700 15 0.07 0.01 corporation(s) controlled by this substantial shareholder

* As far as the Company is aware, the above numbers of shares reflected the interests or short positions of the relevant substantial shareholders as at 31 December 2018. However, these numbers of shares were not reported in the disclosure forms completed by these substantial shareholders because the changes in their interests did not result in a disclosure obligation in accordance with the SFO.

Notes:

1. Anbang Insurance Group Co., Ltd. was deemed to have interests in the 7,352,284,689 A shares of the Company by virtue of its control over 99.98% of the issued share capital of Anbang Life Insurance Co., Ltd.

111 2. Anbang Insurance Group Co., Ltd. was deemed to have interests in the 457,930,200 H shares of the Company by virtue of its control of the issued share capital of Anbang Property and Casualty Insurance Co., Ltd.

3. The interests that Orient Group Co., Ltd. (which held 35,000,000 A shares of the Company), Orient Group Incorporation (which held 1,280,117,123 A shares of the Company) and Huaxia Life Insurance Co., Ltd. (which held 1,733,604,836 A shares of the Company) held in the 3,048,721,959 A shares, as set out in the above table, were deemed to be jointly owned by the three parties after they had become persons acting in concert.

4. The 2,019,182,618 A shares were held by China Oceanwide Holdings Group Co., Ltd., of which 98% of the issued share capital was held by Oceanwide Group Co., Ltd., which was wholly owned by Tohigh Holdings Co., Ltd. Mr. Lu Zhiqiang (a Non-executive Director of the Company) held 77.14% of the issued share capital of Tohigh Holdings Co., Ltd.

According to the SFO, Mr. Lu Zhiqiang, Tohigh Holdings Co., Ltd. and Oceanwide Group Co., Ltd. were deemed to have interests in the 2,019,182,618 A shares held by China Oceanwide Holdings Group Co., Ltd. (Mr. Lu Zhiqiang’s interests in shares are disclosed in this Annual Report in the section headed “Interests of the Directors, Supervisors and chief executives in the securities of the Company or its associated corporations under Hong Kong laws and regulations”).

5. The interests that China Oceanwide Holdings Group Co., Ltd., Oceanwide Group Co., Ltd. and Tohigh Holdings Co., Ltd. held in the 2,019,182,618 A shares, as set out in the above table, were from the same block of shares.

6. The 1,930,715,189 A shares comprised 102,387,827 A shares directly held by South Hope Industrial Co., Ltd. and 1,828,327,362 A shares directly held by New Hope Liuhe Investment Co., Ltd. 51% of the issued share capital of South Hope Industrial Co., Ltd. was held by New Hope Group Co., Ltd., while New Hope Liuhe Investment Co., Ltd. was held as to 25% and 75% of its issued share capital by New Hope Group Co., Ltd. and New Hope Liuhe Co., Ltd., respectively. 24.86% and 29.08% of the issued share capital of New Hope Liuhe Co., Ltd. were held by New Hope Group Co., Ltd. and South Hope Industrial Co., Ltd., respectively.

According to the SFO, New Hope Group Co., Ltd. was deemed to have interests in the 102,387,827 A shares held by South Hope Industrial Co., Ltd. and in the 1,828,327,362 A shares held by New Hope Liuhe Investment Co., Ltd. Meanwhile, New Hope Liuhe Co., Ltd. was also deemed to have interests in the 1,828,327,362 A shares held by New Hope Liuhe Investment Co., Ltd.

7. Ms. Li Wei is the spouse of Mr. Liu Yonghao (a Non-executive Director of the Company). According to the SFO, Ms. Li was deemed to have interests in the 1,930,715,189 A shares of the Company in which Mr. Liu Yonghao had interests (Mr. Liu Yonghao’s interests in shares are disclosed in this Annual Report in the section headed “Interests of the Directors, Supervisors and chief executives in the securities of the Company or its associated corporations under Hong Kong laws and regulations”).

8. Ms. Liu Chang held 37.66% of the issued share capital of New Hope Group Co., Ltd. (see note 6 above). According to the SFO, Ms. Liu was deemed to have interests in the 1,930,715,189 A shares of the Company in which New Hope Group Co., Ltd. had interests. Ms. Liu Chang is the daughter of Mr. Liu Yonghao (a Non- executive Director of the Company).

9. The interests that New Hope Group Co., Ltd., Ms. Li Wei and Ms. Liu Chang held in the 1,930,715,189 A shares, as set out in the above table, were from the same block of shares.

10. The 1,012,300,950 H shares (Long position) comprised 604,300,950 H shares directly held by Oceanwide International Equity Investment Limited and 408,000,000 H shares directly held by Long Prosper Capital Company Limited. Long Prosper Capital Company Limited was a wholly-owned subsidiary of Oceanwide International Equity Investment Limited. 98.67% of the issued share capital of Oceanwide International Equity Investment Limited was indirectly held by Oceanwide Holdings Co., Ltd. 68.02% of the issued share capital of Oceanwide Holdings Co., Ltd. was held by China Oceanwide Holdings Group Co., Ltd. 98% of the issued share capital of China Oceanwide Holdings Group Co., Ltd. was held by Oceanwide Group Co., Ltd., which was wholly owned by Tohigh Holdings Co., Ltd. Mr. Lu Zhiqiang (a Non-executive Director of the Company) held 77.14% of the issued share capital of Tohigh Holdings Co., Ltd.

112 11. The 798,024,133 H shares (in which 703,203,853 H shares were held through unlisted derivatives (convertible instruments)) comprised 84,522,480 H shares directly held by Liberal Rise Limited and 713,501,653 H shares directly held by JH International Investment Company Limited. JH International Investment Company Limited was a wholly-owned subsidiary of Divine Celestial Limited. Divine Celestial Limited and Liberal Rise Limited were wholly-owned subsidiaries of Abhaya Limited, which was wholly-owned by Wickhams Cay Trust Company Limited. Ms. Shi Jing is the founder of the discretionary trust.

According to the SFO, Divine Celestial Limited was deemed to have interests in the 713,501,653 H shares held by JH International Investment Company Limited. Ms. Shi Jing, Wickhams Cay Trust Company Limited and Abhaya Limited were deemed to have interests in the 84,522,480 H shares held by Liberal Rise Limited and 713,501,653 H shares held by JH International Investment Company Limited.

12. The interests that Ms. Shi Jing, Wickhams Cay Trust Company Limited and Abhaya Limited held in the 798,024,133 H shares, as set out in the above table, were from the same block of shares.

13. The 703,204,200 H shares (Long position) and the 703,203,853 H shares (Short position) were directly held by Guotai Junan Financial Products Limited. Guotai Junan Financial Products Limited was an indirectly wholly- owned subsidiary of Guotai Junan International Holdings Limited, of which 64.66% of interests were indirectly held by Guotai Junan Securities Co., Ltd. 30.93% of the issued share capital of Guotai Junan Securities Co., Ltd. was held by Shanghai International Group Co., Ltd.

According to the SFO, Guotai Junan International Holdings Limited, Guotai Junan Securities Co., Ltd. and Shanghai International Group Co., Ltd. were deemed to have interests in 703,204,200 H shares (Long position) and 703,203,853 H shares (Short position) held by Guotai Junan Financial Products Limited.

Besides, 586,993,500 H shares (Long position) and 586,993,211 H shares (Short position) were held through unlisted derivatives as follows:

480,041,500 H shares (Long position) — through physically settled derivatives 106,952,000 H shares (Long position) and — through cash settled derivatives 586,993,211 H shares (Short position)

14. The interests that Guotai Junan International Holdings Limited, Guotai Junan Securities Co., Ltd. and Shanghai International Group Co., Ltd. held in the 703,204,200 H shares (Long position) and 703,203,853 H shares (Short position), as set out in the above table, were from the same block of shares.

15. BlackRock, Inc. had a long position in 435,882,321 H shares (in which 945,500 H shares were held through cash settled unlisted derivatives) and a short position in 5,954,700 H shares (in which 2,040,400 H shares were held through cash settled unlisted derivatives) of the Company by virtue of its control over a number of corporations, which were indirect wholly-owned subsidiaries of BlackRock, Inc., except the following corporations:

15.1 BlackRock Holdco 6, LLC was indirectly owned as to 90% by BlackRock, Inc. BlackRock Holdco 6, LLC had interests and short positions in the Company through the following indirect wholly-owned corporations:

15.1.1 BlackRock Institutional Trust Company, National Association held 78,281,982 H shares (Long position) and 4,193,800 H shares (Short position) in the Company. 15.1.2 BlackRock Fund Advisors held 189,712,388 H shares (Long position) in the Company.

113 15.2 BR Jersey International Holdings L.P. was indirectly owned as to 86% by BlackRock, Inc. BR Jersey International Holdings L.P. had interests in the Company through the following indirect wholly-owned corporations:

15.2.1 BlackRock Japan Co., Ltd. held 22,030,196 H shares (Long position) in the Company. 15.2.2 BlackRock Asset Management Canada Limited held 1,954,199 H shares (Long position) in the Company. 15.2.3 BlackRock Investment Management (Australia) Limited held 2,056,020 H shares (Long position) in the Company. 15.2.4 BlackRock Asset Management North Asia Limited held 4,214,690 H shares (Long position) in the Company. 15.2.5 BlackRock (Singapore) Limited held 53,500 H shares (Long position) in the Company.

15.3 BlackRock Group Limited was owned as to 90% by BR Jersey International Holdings L.P. (see note 15.2 above). BlackRock Group Limited had interests and short positions in the Company through the following direct or indirect wholly-owned corporations:

15.3.1 BlackRock (Netherlands) B.V. held 1,135,900 H shares (Long position) in the Company. 15.3.2 BlackRock Advisors (UK) Limited held 1,112,800 H shares (Long position) in the Company. 15.3.3 BlackRock International Limited held 1,698,120 H shares (Long position) in the Company. 15.3.4 BlackRock Asset Management Ireland Limited held 47,072,626 H shares (Long position) in the Company. 15.3.5 BLACKROCK (Luxembourg) S.A. held 1,071,900 H shares (Long position) and 1,760,900 H shares (Short position) in the Company. 15.3.6 BlackRock Investment Management (UK) Limited held 35,588,680 H shares (Long position) in the Company. 15.3.7 BlackRock Asset Management Deutschland AG held 439,020 H shares (Long position) in the Company. 15.3.8 BlackRock Fund Managers Limited held 19,429,454 H shares (Long position) in the Company. 15.3.9 BlackRock Life Limited held 18,319,780 H shares (Long position) in the Company. 15.3.10 BlackRock Asset Management (Schweiz) AG held 52,500 H shares (Long position) in the Company.

Save as disclosed above and the section headed “Interests of the Directors, Supervisors and chief executives in the securities of the Company or its associated corporations under Hong Kong laws and regulations”, the Company is not aware of any other person having any interests or short positions in the shares and underlying shares of the Company as at 31 December 2018 as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO.

114 (III) Controlling shareholder and ultimate controller

The Company does not have any controlling shareholder or ultimate controller. As at the end of the Reporting Period, the top 10 shareholders of the Company (other than HKSCC Nominees Limited) held an aggregate of 42.46% of the Company's shares. Anbang Life Insurance Co., Ltd. — Conservative Investment Portfolio, the single largest shareholder of the Company, held 10.30% of the total shares of the Company. There was no shareholder who could control not less than half of the voting rights of the Board or at general meetings in accordance with its shareholding, the Articles of Association or agreements.

(IV) Other corporate shareholders with 10% or more equity in the Company

As at the end of the Reporting Period, Anbang Life Insurance Co., Ltd. owned 10% or more of the total shares of the Company.

Name of Person-in- Registered corporate charge or legal Date of capital shareholder representative incorporation (RMB) Principal business or management activities

Anbang Life He Xiaofeng 23 June 2010 30.79 billion Various life insurance businesses such as life Insurance Co., insurance, health insurance and accidental injury Ltd. insurance, reinsurance of the above insurance businesses, insurance fund application business permitted under the PRC laws and regulations, and other businesses approved by the Former CIRC.

(V) Substantial shareholders

1. Substantial shareholders with aggregate shareholding of 5% or more of the Company were as follows:

(1) Anbang Life Insurance Co., Ltd.: It was incorporated on 23 June 2010; its registered capital was RMB30,790 million; its uniform social credit code is 91110000556828452N; its legal representative is He Xiaofeng; its controlling shareholder is Anbang Insurance Group Co., Ltd.; its ultimate controller is Anbang Insurance Group Co., Ltd.; its ultimate beneficiary is Anbang Insurance Group Co., Ltd.; its principal business includes: various life insurance businesses such as life insurance, health insurance and accidental injury insurance, reinsurance of the above insurance businesses, insurance fund application business permitted under the PRC laws and regulations, and other businesses approved by the Former CIRC. As at the end of the Reporting Period, the shares of the Company held by Anbang Life Insurance Co., Ltd. had not been pledged.

On 23 February 2018, the Company noticed that the Former CIRC published on its official website the CIRC Notice Concerning the Takeover of Anbang Insurance Group Co., Ltd. in accordance with Laws 《中國保監會關於對安邦( 保險集團股份有限公司依法實施接管的公告》). Meanwhile, the Company received a written notification from Anbang Insurance Group Co., Ltd., the controlling shareholder of Anbang Life Insurance Co., Ltd., stating that: “The

115 current operation of Anbang Insurance Group Co., Ltd. and its subordinate bodies are generally stable with sufficient cash reserves. We have no intention to reduce our shareholdings in Minsheng Bank in the near future.”

On 29 June 2018, Hexie Health Insurance Co., Ltd. and Anbang Life Insurance Co., Ltd. entered into the Agreement in Relation to Transfer of Shares in China Minsheng Banking Corp., Ltd. between Hexie Health Insurance Co., Ltd. and Anbang Life Insurance Co., Ltd. 《和諧健康保險股份有限公司與安邦人( 壽保險股份有限公司關於中國民生銀行股份有限公司股份轉讓協議》), pursuant to which Hexie Health Insurance Co., Ltd. transferred its A shares in the Company to Anbang Life Insurance Co., Ltd. The transfer of shares has been registered with the Shanghai branch of China Securities Depository and Clearing Company Limited on 3 September 2018. Upon the completion of the share transfer, Hexie Health Insurance Co., Ltd. no longer held any shares of the Company. The aggregate percentage and number of shares in the Company held by Anbang Insurance Group Co., Ltd. and its parties acting in concert remained unchanged, representing 17.84% of the total share capital of the Company. Please refer to relevant announcements of the Company dated 3 July 2018, 28 August 2018 and 5 September 2018 for details.

On 26 September 2018, Anbang Insurance Group Co., Ltd. and Anbang Property and Casualty Insurance Co., Ltd. entered into share transfer agreements with Anbang Life Insurance Co., Ltd., pursuant to which Anbang Insurance Group Co., Ltd. and Anbang Property and Casualty Insurance Co., Ltd. transferred their shares in the Company to Anbang Life Insurance Co., Ltd. The Company was notified by Anbang Group that the transfer of A shares to Anbang Life Insurance Co., Ltd. from Anbang Insurance Group Co., Ltd. and Anbang Property and Casualty Insurance Co., Ltd. has been registered with the Shanghai branch of China Securities Depository and Clearing Company Limited on 7 November 2018. Upon the completion of the share transfer, Anbang Insurance Group Co., Ltd. and Anbang Property and Casualty Insurance Co., Ltd. no longer held any shares of the Company. Anbang Life Insurance Co., Ltd. held 7,352,284,689 A shares and 457,930,200 H shares of the Company, representing 17.84% of the total share capital of the Company. The shareholding percentage and the total number of shares of the Company held by Anbang Life Insurance Co., Ltd. were equal to the shareholding percentage and the total number of shares of the Company held by Anbang Insurance Group Co., Ltd. and its parties acted in concert before the transfer. For details, please refer to the announcements of the Company dated 27 September 2018, 12 November 2018 and 5 September 2018.

116 (2) Orient Group Incorporation: It was incorporated on 16 August 1989; its registered capital was RMB3,714,576,124; its uniform social credit code is 91230199126965908A; its legal representative is Sun Mingtao; its controlling shareholder is Orient Group Co., Ltd.; its ultimate controller is Zhang Hongwei; its ultimate beneficiary is Zhang Hongwei; its parties acting in concert are Orient Group Co., Ltd. and Huaxia Life Insurance Co., Ltd.; its principal business includes: investments in modern agriculture and healthy food, new urbanisation and development, financial industry, ports and transportation industry. As at the end of the Reporting Period, Orient Group Incorporation had pledged 1,279,999,488 ordinary shares of the Company, representing 2.92% of the total share capital of the Company.

Orient Group Co., Ltd.: It was formerly known as Orient Group Investment Holding Co., Ltd and was renamed as Orient Group Co., Ltd. in July 2018; it was incorporated on 26 August 2003; its registered capital was RMB1,000 million; its uniform social credit code is 911100007541964840; its legal representative and ultimate controller is Zhang Hongwei; its parties acting in concert are Orient Group Incorporation and Huaxia Life Insurance Co., Ltd.; its principal business includes: project investment, investment management, real estate development, agent import and export, import and export of goods, economic and trade consultation.

Huaxia Life Insurance Co., Ltd.: It was incorporated on 30 December 2006; its registered capital was RMB15,300 million; its uniform social credit code is 91120118791698440W; its legal representative is Li Fei; it does not have any controlling shareholder, ultimate controller or ultimate beneficiary; its parties acting in concert are Orient Group Co., Ltd. and its subsidiary, Orient Group Incorporation; its principal business includes: various life insurance businesses such as life insurance, health insurance and accidental injury insurance businesses, related reinsurance of the above businesses, insurance fund application business permitted under the PRC laws and regulations, and other businesses approved by the Former CIRC. As at the end of the Reporting Period, the shares of the Company held by Huaxia Life Insurance Co, Ltd. had not been pledged.

(3) China Oceanwide Holdings Group Co., Ltd.: It was incorporated on 7 April 1988; its registered capital was RMB20,000 million; its uniform social credit code is 911100001017122936; its legal representative is Lu Zhiqiang; its controlling shareholder is Oceanwide Group Co., Ltd.; its ultimate controller is Lu Zhiqiang; its ultimate beneficiaries are Lu Zhiqiang, Huang Qiongzi and Lu Xiaoyun; its parties acting in concert are China Oceanwide International Investment Company Limited, Oceanwide International Equity Investment Limited and Long Prosper Capital Company Limited; its principal business includes: finance, real estate and investment management.

China Oceanwide International Investment Company Limited: It was incorporated on 15 October 2008; its registered capital was HKD1,548,058,790; its controlling shareholder is China Oceanwide Holdings Group Co., Ltd.; its ultimate controller is Lu Zhiqiang; its ultimate beneficiaries are Lu Zhiqiang, Huang Qiongzi and

117 Lu Xiaoyun; its parties acting in concert are China Oceanwide Holdings Group Co., Ltd., Oceanwide International Equity Investment Limited and Long Prosper Capital Company Limited; its principal business includes: investment holding.

Oceanwide International Equity Investment Limited: It was incorporated on 17 March 2016; its registered capital was USD50,000; its controlling shareholder is Wuhan CBD (Hong Kong) Company Limited; its ultimate controller is Lu Zhiqiang; its ultimate beneficiaries are Lu Zhiqiang, Huang Qiongzi and Lu Xiaoyun; its parties acting in concert are China Oceanwide Holdings Group Co., Ltd., China Oceanwide International Investment Company Limited and Long Prosper Capital Company Limited; its principal business includes: investment holding.

Long Prosper Capital Company Limited: It was incorporated on 31 August 2016; its registered capital was USD50,000; its controlling shareholder is Oceanwide International Equity Investment Limited; its ultimate controller is Lu Zhiqiang; its ultimate beneficiaries are Lu Zhiqiang, Huang Qiongzi and Lu Xiaoyun; its parties acting in concert are China Oceanwide Holdings Group Co., Ltd., China Oceanwide International Investment Company Limited and Oceanwide International Equity Investment Limited; its principal business includes: investment holding.

As at the end of the Reporting Period, China Oceanwide Holdings Group Co., Ltd., Oceanwide International Equity Investment Limited and Long Prosper Capital Company Limited had pledged a total of 3,027,883,568 ordinary shares of the Company, representing 6.91% of the total share capital of the Company.

2. In accordance with the Provisional Measures on the Administration of Commercial Bank Equity (《商業銀行股權管理暫行辦法》) under the order of the Former CBRC (No.1 of 2018), other substantial shareholders of the Company were as follows:

(1) New Hope Liuhe Investment Co., Ltd.: It was incorporated on 25 November 2002; its registered capital was RMB576,555,600; its uniform social credit code is 91540091744936899C; its legal representative is Wang Pusong; its controlling shareholder is New Hope Liuhe Co., Ltd.; its ultimate controller is Liu Yonghao; its ultimate beneficiary is Liu Yonghao; its party acting in concert is South Hope Industrial Co., Ltd.; its principal business includes: venture capital investment, investment management, financial advisory, wealth management consultancy, corporate reorganisation consultancy, market research, credit investigation, technology development and transfer and technology consultancy services. As at the end of the Reporting Period, the shares of the Company held by New Hope Liuhe Investment Co., Ltd. had not been pledged.

South Hope Industrial Co., Ltd.: It was incorporated on 17 November 2011; its registered capital was RMB1,034,313,725; its paid-up registered capital was RMB884,313,725; its uniform social credit code is 9154009158575152X0; its legal representative is Li Jianxiong; its controlling shareholder is New Hope Group

118 Co., Ltd.; its ultimate controller is Liu Yonghao; its ultimate beneficiary is Liu Yonghao; its party acting in concert is New Hope Liuhe Investment Co., Ltd.; its principal business includes: research and development, wholesale and retail of feeds, electronic products, hardware and electrical appliances, commodities, textiles, office equipment (excluding colour copier), building materials (excluding hazardous chemicals and wood materials), agricultural by-products and special products (excluding products specified by the State), chemical products (excluding hazardous chemicals), mechanical equipment, investment and consultancy services (excluding intermediary services). As at the end of the Reporting Period, the shares of the Company held by South Hope Industrial Co., Ltd. had not been pledged.

(2) Shanghai Giant Lifetech Co., Ltd.: It was incorporated on 12 July 1999; its registered capital was RMB245,400,640; its uniform social credit code is 913101041346255243; its legal representative is Wei Wei; its controlling shareholder is Giant Investment Co., Ltd.; its ultimate controller is Shi Yuzhu; its ultimate beneficiary is Shi Yuzhu; it has no party acting in concert; its principal business includes: manufacturing and sales of food (through its subsidiaries), sales of cosmetics, cleaning products, healthcare equipment and kitchenware, technical development, consultancy services and transfer in healthcare food aspect, back-to- back wholesale of prepackaged food (excluding cooked or braised and refrigerated or frozen food), investment management, asset management, investment consultancy, business information consultancy and business management consultancy. As at the end of the Reporting Period, Shanghai Giant Lifetech Co., Ltd. had pledged 1,379,678,400 ordinary shares of the Company, representing 3.15% of the total share capital of the Company.

(3) China Shipowners Mutual Assurance Association: It was incorporated on 1 January 1984; its registered capital was RMB100,000; its uniform social credit code is 51100000500010993L; its legal representative is Song Chunfeng; it has no controlling shareholder; it has no ultimate controller; it has no ultimate beneficiary; it has no party acting in concert; its principal business includes: marine mutual assurance, business training, marine information exchange, international cooperation and consultancy service. As at the end of the Reporting Period, the shares of the Company held by China Shipowners Mutual Assurance Association had not been pledged.

(4) Good First Group Co., Ltd.: It was incorporated on 2 May 1995; its registered capital was RMB133,000,000; its uniform social credit code is 91310000612260305J; its legal representative is Wu Di; its controlling shareholder is Huang Xi; its ultimate controller is Huang Xi; its ultimate beneficiary is Huang Xi; it has no party acting in concert; its principal business includes: research, development and sale of high-

119 tech products; industrial investment; investments in the education, agriculture, secondary industry, entertainment industry and healthcare products; sale of photographic equipment and new construction materials; wholesale and retail of chemicals (excluding hazardous chemicals and chemicals subject to supervision and control), textiles, hardware and electrical appliances, commodities, metal materials, construction materials, automobiles (excluding passenger cars) and parts, general machinery, electronic products and telecommunication devices and mineral products as approved by the country. As at the end of the Reporting Period, Good First Group Co., Ltd. had pledged 592,298,000 ordinary shares of the Company, representing 1.35% of the total share capital of the Company.

(5) Tongfang Guoxin Investment Co., Ltd.: It was incorporated on 23 May 2007; its registered capital was RMB2,574,162,500; its uniform social credit code is 91500000660887401L; its legal representative is Liu Qinqin; its largest shareholder is Tongfang Financial Holdings (Shenzhen) Co., Ltd. (同方金融控股(深圳)有限公司), a wholly-owned subsidiary of Tongfang Co., Ltd.; it has no controlling shareholder; it has no ultimate controller; its ultimate beneficiary is Tongfang Guoxin Investment Co., Ltd.; its parties acting in concert are Chongqing International Trust Company Limited and Chongqing Guotou Equity Investment Management Co. Ltd. (重慶國投股權投資管理有限公司); its principal business includes: making investments with its own fund (activities of financial business such

120 as accepting public deposits or accepting public deposits in any disguised form, extending loans or trading securities and futures are strictly forbidden); providing its connected companies with consultancy services such as investment information and policy; providing planning and consultancy services in relation to corporate reorganisation and merger and acquisition; and providing corporate management services. (Businesses that require pre-approvals according to laws shall only be conducted after obtaining approvals from the relevant authorities.) As at the end of the Reporting Period, Tongfang Guoxin Investment Co., Ltd. had pledged 737,000,000 ordinary shares of the Company, representing 1.68% of the total share capital of the Company.

121 Chapter 5 Directors, Supervisors, Senior Management and Employees

I. Directors, Supervisors and Senior Management

(I) Basic information

Aggregate Shares remuneration held at before tax the Shares received beginning held during the Any of the at the Reporting remuneration Reporting end of the Period received Year of Period Reporting (RMB ten from related Name Gender birth Position Term of office (share) Period (share) thousand) parties HONG Qi M 1957 Chairman & 20 February 2017– 0 0 447.08 No Executive present Director ZHANG Hongwei M 1954 Vice Chairman & 20 February 2017– 0 0 93.00 Yes Non-executive present Director LU Zhiqiang M 1951 Vice Chairman & 20 February 2017– 0 0 91.50 Yes Non-executive present Director LIU Yonghao M 1951 Vice Chairman & 20 February 2017– 0 0 93.00 Yes Non-executive present Director ZHENG Wanchun M 1964 Executive Director 20 February 2017– 0 0 411.03 No & President present SHI Yuzhu M 1962 Non-executive 20 February 2017– 0 0 77.50 Yes Director present WU Di M 1965 Non-executive 20 February 2017– 0 0 87.00 Yes Director present SONG Chunfeng M 1969 Non-executive 20 February 2017– 0 0 — Yes Director present WENG Zhenjie M 1962 Non-executive 20 February 2017– 0 0 — No Director present LIU Jipeng M 1956 Independent 20 February 2017– 0 0 88.00 No Non-executive present Director LI Hancheng M 1963 Independent 20 February 2017– 0 0 92.00 No Non-executive present Director

122 Aggregate Shares remuneration held at before tax the Shares received beginning held during the Any of the at the Reporting remuneration Reporting end of the Period received Year of Period Reporting (RMB ten from related Name Gender birth Position Term of office (share) Period (share) thousand) parties XIE Zhichun M 1958 Independent 20 February 2017– 0 0 89.00 No Non-executive present Director PENG Xuefeng M 1962 Independent 20 February 2017– 0 0 87.50 No Non-executive present Director LIU Ningyu M 1969 Independent 20 February 2017– 0 0 95.50 No Non-executive present Director TIAN Suning M 1963 Independent 21 June 2018– 0 0 41.00 No Non-executive present Director ZHANG Juntong M 1974 Chairman of 20 February 2017– 0 0 390.06 No the Board of present Supervisors & Employee Supervisor WANG Jiazhi M 1959 Vice Chairman 20 February 2017– 759,720 911,664 386.69 No of the Board present of Supervisors & Employee Supervisor GUO Dong M 1961 Vice Chairman 20 February 2017– 0 0 304.54 No of the Board present of Supervisors & Employee Supervisor WANG Hang M 1971 Shareholder 20 February 2017– 0 0 72.50 No Supervisor present ZHANG Bo M 1973 Shareholder 20 February 2017– 0 0 67.00 No Supervisor present LU Zhongnan M 1955 Shareholder 20 February 2017– 0 0 72.50 No Supervisor present WANG Yugui M 1951 External Supervisor 20 February 2017– 0 0 76.50 No present BAO Jiming M 1952 External Supervisor 20 February 2017– 0 0 66.50 No present CHEN Qiong F 1963 Executive Vice 8 June 2018– 0 0 152.55 No President present SHI Jie M 1965 Executive Vice 20 February 2017– 0 0 328.66 No President present LI Bin F 1967 Executive Vice 20 February 2017– 0 0 328.66 No President present LIN Yunshan M 1970 Executive Vice 20 February 2017– 0 0 328.66 No President present HU Qinghua M 1963 Executive Vice 8 June 2018– 0 0 301.12 No President present Chief Risk Officer 20 February 2017– present

123 Aggregate Shares remuneration held at before tax the Shares received beginning held during the Any of the at the Reporting remuneration Reporting end of the Period received Year of Period Reporting (RMB ten from related Name Gender birth Position Term of office (share) Period (share) thousand) parties BAI Dan F 1963 Chief Financial 20 February 2017– 0 0 336.39 No Officer present Board Secretary 4 April 2018– present ZHANG Yuebo M 1962 Chief Audit Officer 20 February 2017– 0 0 216.15 No present OUYANG Yong M 1963 Assistant President 4 April 2018– 0 0 200.65 No present LIANG Yutang M 1958 Former Vice 20 February 2017– 0 0 295.81 No Chairman 12 October 2018 & Former Executive Director YAO Dafeng M 1962 Former Non- 20 February 2017– 0 0 50.50 Yes executive 3 July 2018 Director TIAN Zhiping M 1966 Former Non- 20 February 2017– 0 0 — No executive 3 July 2018 Director CHENG Hoi-chuen M 1948 Former Independent 15 June 2012– 0 0 48.50 No Non-executive 21 June 2018 Director CHENG Guoqi M 1975 Former External 20 February 2017– 0 0 39.50 No Supervisor 3 July 2018 FANG Zhou M 1970 Former Board 20 February 2017– 0 0 67.81 No Secretary 4 April 2018

Notes:

1. On 4 April 2018, the seventh extraordinary meeting of the seventh session of the Board of the Company considered and passed the Resolution on the Appointment of Ms. Bai Dan to Concurrently Serve as the Board Secretary of the Company 《關於聘任白丹女士兼任本公司董事會秘書的決議》( ). On 29 August 2018, the Company issued the Announcement on the Approval of the Qualification of Board Secretary 《關於董事會秘書資格核准的公告》( ), pursuant to which, the qualification of Bai Dan as Board Secretary of the Company was approved by the CBIRC;

2. On 4 April 2018, Mr. Fang Zhou tendered his resignation as Board Secretary and Joint Company Secretary of the Company due to personal reason;

3. On 4 April 2018, the seventh extraordinary meeting of the seventh session of the Board of the Company considered and passed the Resolution on the Nomination of Mr. Tian Suning as a Candidate of Independent Non-executive Director of the Company 《關於提名田溯寧先生為本公司獨立非執行董事候選人的決議》( ). On 21 June 2018, the 2017 annual general meeting of the Company elected Mr. Tian Suning as an Independent Non-executive Director of the Company. On 3 September 2018, the Company issued the Announcement on the Approval of the Qualification of Independent Director 《關於獨立董事資格核准的公告》( ), pursuant to which, the qualification of Mr. Tian Suning as Independent Non-executive Director of the Company was approved by the CBIRC;

4. On 4 April 2018, the seventh extraordinary meeting of the seventh session of the Board of the Company considered and passed the Resolution on the Appointment of Mr. Ouyang Yong to Serve as an Assistant President of the Company 《關於聘任歐陽勇先生擔任本公司行長助理的決議》( ). On 29 June 2018, the Company issued the Announcement on the Approval of the Qualification of Senior Management 《關於高級管理人員資格核准的公( 告》), pursuant to which, the qualification of Mr. Ouyang Yong as Assistant President of the Company was approved by the CBIRC;

124 5. On 8 June 2018, the ninth meeting of the seventh session of the Board of the Company considered and passed the Resolution on the Appointment of Ms. Chen Qiong and Mr. Hu Qinghua to Serve as the Executive Vice Presidents of the Company 《關於聘任陳瓊女士、胡慶華先生擔任本公司副行長的決議》( ). On 24 August 2018, the Company issued the Announcement on the Approval of the Qualifications of Senior Management 《關於高級管理人員資格( 核准的公告》), pursuant to which, the qualifications of Chen Qiong and Hu Qinghua as Executive Vice Presidents of the Company were approved by the CBIRC;

6. On 21 June 2018, Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his term of office of six years;

7. In July 2018, capital reserve capitalisation for 2017 of the Company was completed. The number of shares held by Mr. Wang Jiazhi, Vice Chairman of the Board of Supervisors, has increased from 759,720 shares to 911,664 shares;

8. On 3 July 2018, Mr. Yao Dafeng and Mr. Tian Zhiping tendered their resignations as Directors of the Company and members of the related special committees under the Board in order to devote more time and attention to other business commitments;

9. On 3 July 2018, Mr. Cheng Guoqi tendered his resignation as a Supervisor and member of the related special committees under the Board of Supervisors in order to devote more time and attention to other business commitments;

10. On 12 October 2018, due to the reach of retirement age, Mr. Liang Yutang tendered his resignation as a Vice Chairman and Executive Director of the Company and ceased to act as the members of the related special committees under the Board;

11. As at the disclosure date of this Annual Report, the directorship qualification of Mr. Weng Zhenjie are subject to the approval of the regulatory authority of China’s banking industry. Mr. Weng Zhenjie attended all the meetings as non- voting delegate during the year;

12. During the Reporting Period, none of the incumbent Directors, Supervisors and Senior Management or Directors, Supervisors or Senior Management retired during the Reporting Period had been subject to any penalty imposed by the securities regulatory authorities during the last three years;

13. During the Reporting Period, the total pre-tax emoluments of current and resigned Directors, Supervisors and Senior Management were RMB59,243,600. The total pre-tax remuneration of current Executive Directors, Employee Supervisors and Senior Management is still in confirmation process and further disclosure regarding such unconfirmed part will be made by the Company in due course;

14. In March 2019, the Company paid remuneration for 2017 of RMB665,000 and remuneration for 2018 of RMB805,000 to Director Mr. Song Chunfeng.

(II) Current positions held by the Directors and Supervisors in the companies that are shareholders of the Company

Name Name of the Company’s Position Term of Office shareholder company Zhang Orient Group Incorporation Honorary chairman of June 2017 Hongwei the board of directors –Present and director Lu Zhiqiang China Oceanwide Holdings Chairman of the board May 1999 Group Co., Ltd. of directors and –Present president

125 Name Name of the Company’s Position Term of Office shareholder company Liu Yonghao New Hope Liuhe Co., Ltd. Director January 2003 –Present Wu Di Good First Group Co., Ltd. Chairman of the board January 2003 of directors and –Present president Song China Shipowners Mutual General manager March 2016 Chunfeng Assurance Association –Present Wang Hang New Hope Liuhe Co., Ltd. Non-executive director November 2011 –Present

(III) Major working experience of Directors, Supervisors and Senior Management

Directors

Executive Directors

Mr. Hong Qi, born in 1957, has been an Executive Director of the Company since 8 January 2004. He is also the Chairman of the Company, the chairman of the Strategic Development and Investment Management Committee and the member of the Nomination Committee under the Board. Mr. Hong is a standing council member of the twelfth session of executive committee of ACFIC, the chairman of CMBC International, the vice president of China Chamber of International Commerce, an honorary vice chairman of Sun Yefang Economic Science Foundation, the vice council chairman of China Red Ribbon Foundation of ACFIC, the vice council chairman of China Foundation for Poverty Alleviation of ACFIC, a deputy director of Working Committee for Poverty Alleviation of ACFIC, the council chairman of China Academy of New Supply-side Economics, a standing council member of China International Finance Society, a member of Financial Planning Standard Board (China) and a council member of China Entrepreneur Club. Mr. Hong was an Executive Vice President of the Company from 2000 to March 2009 and became the President in March 2009 and the Chairman of the Company in August 2014. He was the director of the business department of Head Office of the Company from January 1996 to September 1996. Mr. Hong acted as a vice general manager of Beijing administrative department of the Company from September 1996 to April 1998 and was promoted to the general manager from 1998 to 2000. Prior to joining the Company, Mr. Hong was the president of the Beihai branch of the Bank of Communications from 1994 to 1995, a deputy director of the Securities Research Institute of Renmin University of China from 1991 to 1994, and a senior officer at the headquarters of the PBOC from 1985 to 1991. Mr. Hong has over 33 years of experience in banking management and finance industry. Mr. Hong obtained his Doctor’s Degree in Economics from Renmin University of China in 1994.

Mr. Zheng Wanchun, born in 1964, has been an Executive Director of the Company since 1 February 2016. He is also the President of the Company and a member of the Strategic Development and Investment Management Committee and the Compensation and Remuneration Committee under the Board. Before joining the Company, Mr. Zheng served as a vice president of Industrial and Commercial Bank of China Limited (“ICBC”, listed on the SSE (stock code: 601398) and on the SEHK (stock code: 01398)) from September 2013 to October 2015. He served as the president of China Great Wall Asset Management

126 Corporation from February 2011 to September 2013, a vice president of China Huarong Asset Management Co., Ltd. from December 2004 to February 2011, an assistant president of China Huarong Asset Management Co., Ltd. from September 2003 to December 2004, the general manager of operation management department of China Huarong Asset Management Co., Ltd. from April 2002 to September 2003, the general manager of creditor’s rights management department of China Huarong Asset Management Co., Ltd. from June 2000 to April 2002, a vice general manager of industrial and commercial credit department of ICBC from October 1999 to June 2000 and acted as an assistant president and the general manager of the business department of Hainan branch of ICBC from November 1998 to October 1999. Mr. Zheng obtained his Doctor’s Degree in Economics from Renmin University of China in 2000 and is a senior economist.

Non-executive Directors

Mr. Zhang Hongwei, born in 1954, has been a Vice Chairman of the Board of the Company since 30 April 2000. Mr. Zhang is a Non-executive Director and also a member of the Strategic Development and Investment Management Committee and the Nomination Committee under the Board. Mr. Zhang is the honorary chairman and director of Orient Group Incorporation (listed on the SSE (stock code: 600811)), chairman of United Energy Group Limited (listed on the SEHK (stock code: 00467)) and Orient Group Co., Ltd. Mr. Zhang was previously the chairman of Jinzhou Port Co., Ltd. (listed on the SSE (stock code: 600190/900952)), a member of the eleventh session of CPPCC and a standing committee member of the tenth session of CPPCC. Mr. Zhang served as a vice chairman of the ACFIC from 1997 to 2007. Mr. Zhang obtained his MBA Degree from Harbin Institute of Technology in 1996 and is a senior economist.

Mr. Lu Zhiqiang, born in 1951, has been a Vice Chairman of the Board of the Company since 16 July 2006. Mr. Lu is a Non-executive Director and also a member of the Strategic Development and Investment Management Committee and the Compensation and Remuneration Committee under the Board. Mr. Lu was a Director from the establishment of the Company to June 2003 and was re-elected as a Director of the Company in 2006. Mr. Lu is the chairman and president of Oceanwide Group Co., Ltd., Tohigh Holdings Co., Ltd. and China Oceanwide Holdings Group Co., Ltd., the chairman of Oceanwide Holdings Co., Ltd. (listed on the SZSE (stock code: 000046)) and the chairman of China Minsheng Trust Co., Ltd. Mr. Lu was the Chairman of the Board of Supervisors of the Company from June 2003 to December 2004 and a Vice Chairman of the Board of Supervisors of the Company from December 2004 to June 2006. He was also a director of Haitong Securities Co., Ltd. (listed on the SSE (stock code: 600837) and on the SEHK (stock code: 06837)) and a non-executive director of Legend Holdings Corporation (listed on the SEHK (stock code: 03396)). Mr. Lu was a standing committee member and a member of the Committee for Economic Affairs of the CPPCC, and a standing committee member and vice chairman of ACFIC. Mr. Lu obtained his Master’s Degree in Economics from Fudan University in 1995 and is a research fellow.

127 Mr. Liu Yonghao, born in 1951, has been a Vice Chairman of the Board of the Company since 23 March 2009. Mr. Liu is a Non-executive Director, a member of the Strategic Development and Investment Management Committee and the Nomination Committee under the Board and was previously a Vice Chairman of the Board from the establishment of the Company to 2006. Mr. Liu is currently the chairman of New Hope Group Co., Ltd., a director of New Hope Liuhe Co., Ltd. (listed on the SZSE (stock code: 000876)) and the chairman of the General Association of Sichuan Entrepreneurs. Mr. Liu is a committee member of the thirteenth session of CPPCC, a vice president of China Association of Agricultural Leading Enterprises, a vice president of China Association for Public Companies and one of the promoters of China Society for Promotion of the Guangcai Program. Mr. Liu was previously a vice president of China Society for Promotion of the Guangcai Program, a vice chairman of the seventh and eighth sessions of ACFIC, a committee member of the eighth, ninth, tenth and eleventh sessions of CPPCC, a standing committee member of the ninth and tenth sessions of CPPCC, a vice chairman of the tenth and eleventh sessions of Committee for Economic Affairs of the CPPCC, and a representative of the twelfth session of the National People’s Congress.

Mr. Shi Yuzhu, born in 1962, has been a Non-executive Director of the Company and a member of the Strategic Development and Investment Management Committee and Nomination Committee under the Board since 20 February 2017. Mr. Shi is the chairman of Giant Investment Co., Ltd. and Giant Network Group Co., Ltd. (listed on the SZSE (stock code: 002558)) (formerly known as Chongqing New Century Cruise Co., Ltd.), the chairman of the Giant Charity Foundation. Mr. Shi was previously a Non-executive Director of the Company from 2006 to 2014. Mr. Shi obtained his Bachelor’s Degree in Mathematics from Zhejiang University in 1984 and graduated from the postgraduate program of soft science from Shenzhen University in 1990.

Mr. Wu Di, born in 1965, has been a Non-executive Director of the Company since 15 June 2012. He is also a member of the Compensation and Remuneration Committee and the Risk Management Committee under the Board. Mr. Wu is the chairman of the board of directors and president of Good First Group Co., Ltd., and a director of Hangzhou United Rural Commercial Bank. In addition, Mr. Wu is a standing committee member of International Boxing Association, the vice president of Chinese Boxing Federation (CBF), the standing chairman of China International Chamber of Commerce for the Private Sector, representative of the thirteenth session of the Fujian Provincial People’s Congress, the vice chairman of Fujian Province Association of Industry and Commerce, the honorary vice chairman of Fujian Province Guangcai Promotion Society, chairman of the Liaoning Chamber of Commerce in Fujian, a council member of the 1st session of General Association of Liaoning Entrepreneurs, the honorary chairman of the second Non-stated-owned Enterprise Chamber of Commerce in Fujian, the honorary chairman of the 1st session of Xiamen chamber of Commerce in Shanghai, a standing committee member of the thirteenth session of CPPCC Xiamen, the vice chairman of Xiamen Municipal Committee of China National Democratic Construction Association, a vice chairman of Xiamen Economics Society, chief supervisor of Xiamen Silk Road National Strategy Research Center, the vice chairman of Xiamen Association of Cross-strait Exchanges and also a council member of Jimei University. Mr. Wu was the assistant director of Dalian Ocean Fishery Group and a vice general manager of Shenzhen Tianma New Construction Material Co., Ltd., and the director of Yong An Property Insurance

128 Company Limited. Mr. Wu obtained his Doctor’s Degree in Economics from Renmin University of China and now serves as a guest professor of Renmin University of China. Mr.Wu is a senior economist.

Mr. Song Chunfeng, born in 1969, has been a Non-executive Director of the Company and a member of the Related Party Transactions Supervision Committee and the Risk Management Committee under the Board since 20 February 2017. Mr. Song is the general manager of China Shipowners Mutual Assurance Association. Mr. Song also serves as a supervisor of Haitong Securities Co., Ltd. (listed on the SSE (stock code: 600837) and on the SEHK (stock code: 06837)). Mr. Song was the managing director of COSCO (Hong Kong) Insurance Brokers Limited, the chairman of the board of directors and general manager of Shenzhen COSCO Insurance Brokers Limited, the manager of the commerce division under the transportation department of COSCO/China COSCO Holdings Co., Ltd. (listed on the SSE (stock code: 601919)), and the principal staff member, deputy director, director and manager of the commerce division of the department of commerce under the department of transportation of COSCO. Mr. Song obtained his Doctor’s Degree in Law from Peking University in 2006 and is a senior economist.

Mr. Weng Zhenjie, born in 1962, has been a Non-executive Director of the Company and a member of the Strategic Development and Investment Management Committee and the Audit Committee under the Board since 20 February 2017. Mr. Weng is the chairman of Chongqing International Trust Company Limited. Mr. Weng also serves as a director of China Trust Protection Fund Co., Ltd., China Trust Registration Corporation Limited, Chongqing Three Gorges Bank Co., Ltd., Hefei Science & Technology Rural Commercial Bank Company Limited, ABC Life Insurance Co., Ltd., GuoDu Securities Co., Ltd. (listed on National Equities Exchange and Quotations (stock code: 870488)), a vice chairman of the Chongqing Committee of China National Democratic Construction Association, a standing committee member of the fifth session of Chinese People’s Political Consultative Conference of Chongqing and a deputy officer of the eleventh session of the Central Financial Committee of China National Democratic Construction Association. Mr. Weng worked as the chairman and chief executive officer of Chongqing International Trust Company Limited, the chairman of Southwest Securities Co., Ltd. (listed on the SSE (stock code: 600369)), the chairman of Chongqing Three Gorges Bank Co., Ltd., a member of the ninth session of the Central Economic Committee of China National Democratic Construction Association, a deputy officer of the tenth session of the Central Financial Committee of China National Democratic Construction Association, a deputy to the third and fourth sessions of the National People’s Congress of Chongqing, and a standing committee member of the National People’s Congress of Chongqing, a vice general manager of Beijing Centergate Technologies (Holding) Co., Ltd. and an instructor of the Chinese People’s Liberation Army Institute of Telecommunication Engineering. Mr. Weng obtained his Master’s Degree in Engineering in 1986. He is a senior economist and an expert with special allowances of the State Council.

129 Independent Non-executive Directors

Mr. Liu Jipeng, born in 1956, has been an Independent Non-executive Director of the Company since 28 October 2016. Mr. Liu is a member of the Nomination Committee, the Compensation and Remuneration Committee and the Related Party Transactions Supervision Committee under the Board. Mr. Liu has served as dean of the Business School of China University of Political Science and Law since November 2016, and has been a director, professor and doctoral tutor of the Capital Finance Research Institute of China University of Political Science and Law since June 2015. He is also a deputy head of the Independent Non-executive Director Committee of China Association for Public Companies, vice chairman of China Enterprise Reform and Development Society and legal adviser of the State-owned Assets Supervision and Administration Commission of the State Council. Mr. Liu Jipeng has been an independent non-executive director of China Tonghai International Financial Limited (previously known as China Oceanwide International Financial Limited) (listed on the SEHK (stock code: 00952)) since December 2017, an independent non-executive director of Zhongjin Gold Corp., Ltd. (listed on the SSE (stock code: 600489)) since May 2014, and an independent non-executive director of Chongqing Changan Automobile Co., Ltd. (listed on the SZSE (stock code: 000625)) since March 2016, and an independent non-executive director of China Oceanwide Holdings Limited (listed on the SEHK (stock code: 00715)) since November 2014. Mr. Liu served as an independent non-executive director of Wanda Hotel Development Company Limited (listed on the SEHK (stock code: 00169)) from July 2013 to March 2019, an independent non-executive director of AVIC Capital Co., Ltd. (listed on the SSE (stock code: 600705)) from May 2011 to May 2017 and an independent non-executive director of Dalian Wanda Commercial Properties Co., Ltd. (previously listed on the SEHK (stock code: 03699) (delisted)) from December 2012 to January 2016. Mr. Liu Jipeng was a professor of law and economic research centre of China University of Political Science and Law from April 2006 to June 2015, professor and head of corporate research centre of Capital University of Economics and Business from September 2001 to April 2006, the chairman of Beijing Standard Consultancy Company Limited from February 1993 to June 1996, a director and assistant researcher of CITIC International Research Centre (中信國際研究所室) from April 1989 to January 1997 and a deputy academic secretary (deputy director) and assistant researcher of Institute of Industrial Economics of China Academy of Social Science from July 1986 to March 1989. Mr. Liu Jipeng received his Bachelor’s Degree from the Department of Industry and Economics of Beijing Institute of Economics in July 1983 and his Master’s Degree from the Chinese Academy of Social Sciences in July 1986. Mr. Liu Jipeng is a senior economist and qualified as certified public accountant (non-practicing).

Mr. Li Hancheng, born in 1963, has been an Independent Non-executive Director of the Company since 28 October 2016. Mr. Li is the chairman of the Related Party Transactions Supervision Committee and a member of the Nomination Committee and the Compensation and Remuneration Committee under the Board. Mr. Li is a senior partner and a lawyer of Beijing S&P Law Firm, and qualified as a lawyer in the People’s Republic of China. He is also a member of China Maritime Law Association, All China Lawyers Association, and Beijing Lawyers’ Association. He has been an independent non-executive director of Styland Holdings Limited (listed on the SEHK (stock code: 00211)) since December 2008, and an external director of Beijing Electronics Holding Company Limited since February

130 2015. Mr. Li Hancheng was the administration officer and manager of Beijing S&P Law Firm from May 2000 to December 2004, and a staff member, a principal staff member and a deputy director of the Office of Personnel, and an assistant judge, a judge and a senior judge of Economic Division of the Supreme People’s Court of People’s Republic of China from July 1984 to April 2000. Mr. Li Hancheng obtained his Bachelor’s Degree in Law from Southwest College of Political Science & Law (currently known as Southwest University of Political Science and Law) in 1984.

Mr. Xie Zhichun, born in 1958, has been an Independent Non-executive Director of the Company since 28 October 2016 and is also the chairman of the Risk Management Committee and a member of the Nomination Committee and the Compensation and Remuneration Committee under the Board. Mr. Xie is a vice chairman of the consultation committee of Shenzhen Qianhai Shekou Free Trade Zone and Qianhai Shenzhen-Hong Kong Cooperation Zone, distinguished professor of the Research Center for Economic Development in China’s Special Economic Zone in Shenzhen University and postgraduate supervisor of PBC School of Finance of Tsinghua University. Mr. Xie is serving as an executive director and the chairman of China Fortune Financial Group Limited (listed on the SEHK (stock code: 00290)) since January 2017, an independent non-executive director of China Taiping Insurance Holdings Company Limited (listed on the SEHK (stock code: 00966)) since 2015 and an independent non-executive director of SuperRobotics Limited (listed on the SEHK (stock code: 08176)) since August 2018. He acted as a non-executive director of China Smartpay Group Holdings Limited (listed on the SEHK (stock code: 08325)) from 2017 to 2018, a non-executive director of Elife Holdings Limited (listed on the SEHK (stock code: 00223)) (formerly known as Sino Resources Group Limited) from 2016 to 2017, a vice general manager of China Investment Corporation and an executive director and the general manager of Central Huijin Investment Ltd. from 2014 to 2015. From 2008 to 2014, Mr. Xie Zhichun was an executive director and vice general manager of China Everbright Group Limited and the chairman of the board of directors of Sun Life Everbright Life Insurance Co., Ltd. and chairman of the board of directors of Sun Life Everbright Asset Management Co., Ltd. From 2006 to 2008, he acted as a vice president and director of reorganisation and listing office of China Everbright Bank Company Limited. Mr. Xie Zhichun acted as a director and the president of Everbright Securities Company Limited, an executive director of China Everbright Group, an executive director of China Everbright Limited (listed on the SEHK (stock code: 00165)), a vice chairman (unattending) of China Enterprises Association (Singapore), a director of Shenyin & Wanguo Securities Co., Ltd., a director of Everbright Pramerica Fund Management Co., Ltd. and a vice chairman (unattending) of Securities Association of China from 2001 to 2006. From 1997 to 2001, he acted as an executive director and the president of China Everbright Asia-Pacific Company Limited (listed on Singapore Stock Exchange), a director of Shenyin & Wanguo Securities Co., Ltd, the chairman of China Everbright Asia-Pacific (New Zealand) Company, chairman of the board of directors of China Everbright (South Africa) Company, a director of China Everbright Asia-Pacific Industrial Investment Fund Management Company (中國光大亞太工業投資基金管理公司) and a director of Thailand Sunflower Company (泰國向日葵公司). Mr. Xie Zhichun was a director and vice president of Everbright Securities Company Limited (listed on the SSE (stock code: 601788) and on the SEHK (stock code: 06178)), a director of China Everbright Financial Holding Company (Hong Kong) (中國光大金融控股公司

131 (香港)), the general manager of northern head office of Everbright Securities Company Limited, a director of Da Cheng Investment Fund Management Company from 1996 to 1999. Mr. Xie was a deputy director of preparation team and deputy president of Dalian branch of China Everbright Bank from 1994 to 1996. Mr. Xie was the general manager of international department of Heilongjiang branch of China Everbright Bank from 1992 to 1994. Mr. Xie Zhichun obtained his Bachelor’s Degree in Philosophy from Heilongjiang University in 1982, Master’s Degree in Economics from Harbin Institute of Technology in 1993 and Doctor’s Degree in Economics from Nankai University in 2004. Mr. Xie attended advanced management programmes in Yale School of Management in the United States from August to September 2011 and in Harvard Business School (AMP156) from April 1999 to July 1999, respectively. Mr. Xie Zhichun is a senior economist.

Mr. Peng Xuefeng, born in 1962, has been an Independent Non-executive Director of the Company and chairman of the Nomination Committee, a member of the Compensation and Remuneration Committee and the Audit Committee under the Board since 20 February 2017. Mr. Peng is the director of Beijing Dentons Law Offices, LLP and an independent non-executive director of Dong Yi Ri Sheng Home Decoration Group Co., Ltd. (listed on the SZSE (stock code: 002713)) and a standing committee member of the twelfth session of CPPCC. Mr. Peng was a lawyer at Beijing No. 4 Law Firm (北京市第四律師事務所), a lawyer and deputy director at Beijing Yanshan Law Firm (北京市燕山區律師事務所), a clerk at the intermediate people’s court in Cangzhou, Hebei Province. He served as an independent non-executive director of Beijing Haohua Energy Resource Co., Ltd. (listed on the SSE (stock code: 601101)), Beijing SINODATA Technology Co., Ltd. (listed on the SZSE (stock code: 002657)), Beijing Vantone Real Estate Co., Ltd. (listed on the SSE (stock code: 600246)), Shandong Shipping Corporation (listed on National Equities Exchange and Quotations (stock code: 835589)), Huida Sanitary Ware Co., Ltd. (listed on the SSE (stock code: 603385)) and Henan Zhongfu Industrial Co., Ltd (listed on the SSE (stock code: 600595)). He was also a representative of the eleventh session of the National People’s Congress, a vice president of the fifth session of All China Lawyers Association, a standing council member of the fourth session of All China Lawyers Association, a vice president of the sixth and the seventh sessions of Beijing Lawyers Association, a standing council member of the fourth and the fifth sessions of Beijing Lawyers Association, a member of the standing committee of the tenth session of All-China Youth Federation, a member of the eighth session of AllChina Youth Federation, a standing member and the chief supervisor of the ninth session of Beijing Youth Federation and a member of the seventh and eighth sessions of Beijing Youth Federation. Mr. Peng obtained his Doctor’s Degree in Law from Peking University in 2008 and has the qualification of lawyer, qualification of lawyer engaged in securities and qualification of certified tax agent.

Mr. Liu Ningyu, born in 1969, has been an Independent Non-executive Director of the Company and the chairman of the Audit Committee and a member of the Nomination Committee and the Related Party Transactions Supervision Committee under the Board since 20 February 2017. Mr. Liu serves as the managing partner of Ruihua Certified Public Accountants (special general partnership), vice chairman of Liaoning Institute of Certified Public Accountant, vice president of Liaoning Province Assets Evaluation Association, a director of China Engineering Cost Association and an independent non-executive director of Zhongchao New Material Shares Co., Ltd. He was the managing partner of Crowe

132 Horwath China CPAs (special general partnership) (國富浩華會計師事務所 (特殊普通合夥) ), the chief executive officer of Crowe Horwath China CPAs (國富浩華會計師事務所有限公司), the chief accountant of Liaoning Wanlong Jinhui CPA Co., Ltd. (遼寧萬隆金匯會計師事務所有限公司), a project manager of Liaoning Accounting Firm (遼寧會計師事務所) and an independent non-executive director of Jinzhou Port Co., Ltd. (listed on the SSE (stock code: 600190)). Mr. Liu Ningyu obtained his MBA Degree from Macau University of Science and Technology in 2004 and studied for a senior course of the Executive Master of Business Administration (EMBA) held by Peking University from 2012 to 2013. Mr. Liu is a professor level senior accountant, a certified public accountant, a certified public valuer, a certified public accountant in Australia, the national accounting leading talent and senior member of The Chinese Institute of Certified Public Accountants.

Mr. Tian Suning, born in 1963, holds a Doctor’s Degree, has been an Independent Non- executive Director of the Company since 21 June 2018. He is also the chairman of the Compensation and Remuneration Committee and a member of the Strategic Development and Investment Management Committee and the Audit Committee under the Board. Mr. Tian Suning has been the chairman of China Broadband Capital Partners, L.P. since May 2006, the chairman of AsiaInfo, Inc. since January 2014, an executive director and the chairman of AsiaInfo Technologies Limited (a company listed on the SEHK (stock code: 01675)) since June 2018. He was an independent non-executive director of Shanghai Pudong Development Bank Co., Ltd. (a company listed on the SSE, stock code: 600000) from April 2016 to March 2018. Mr. Tian Suning has been an independent non-executive director of Lenovo Group Limited (a company listed on the Hong Kong Stock Exchange, stock code: 00992) since August 2007. Mr. Tian Suning was the vice chairman, executive director and chief executive officer of China Netcom Group Corporation (Hong Kong) Limited from April 2005 to April 2006, president and chief executive officer of China Network Communication Co., Ltd. from August 1999 to April 2005, founder and chief executive officer of AsiaInfo Technologies (China) Co., Ltd. from December 1993 to August 1999. Mr. Tian Suning also served as an independent non-executive director of Taikang Life Insurance Co., Inc. from July 2008 to August 2016, an independent non-executive director of MasterCard International Incorporated from March 2006 to June 2016, an independent non-executive director of MasterCard Incorporated (a company listed on the New York Stock Exchange, stock code: MA) from March 2006 to June 2016, and a non-executive director of China Jiuhao Health Industry Corporation Limited (currently known as Huayi Tencent Entertainment Company Limited, a company listed on the Hong Kong Stock Exchange, stock code: 00419) from January 2008 to February 2016. Mr. Tian Suning received his Bachelor’s Degree in Ecology from Liaoning University in 1985, Master’s Degree in Ecology from the Graduate University of Chinese Academy of Sciences in 1987, and Doctor’s Degree in Resources Management from Texas Tech University of USA in 1993. Mr. Tian Suning was awarded Outstanding Youth of the Year for Successful Commercialisation of Scientific Research Achievements (求是傑出青年成果轉化獎) by China Association for Science and Technology in July 2003 and Outstanding Returned Scholar Award (全國留學回國人員優秀個人獎) by the Ministry of Education of the People’s Republic of China in August 2003.

133 Supervisors

Mr. Zhang Juntong, born in 1974, is the Chairman of the Board of Supervisors and the Employee Supervisor of the Company. He is also the Chairman of the Supervisory Committee and a member of the Nomination and Examination Committee under the Board of Supervisors. Mr. Zhang joined the Company in 2016. Before joining the Company, Mr. Zhang served as a deputy director and the director of general administration department of the Former CBRC. He served as a researcher and a deputy director of General Office of the CSRC. Mr. Zhang also served in China National Technical Import and Export Corporation (中國技術進出口總公司) and China General Technology (Group) Holding, Limited (中國通用技術 (集團) 控股有限責任公司). Mr. Zhang obtained his Master’s Degree in World Economy from Peking University.

Mr. Wang Jiazhi, born in 1959, is a Vice Chairman of the Board of Supervisors and the Employee Supervisor of the Company. He is also a member of the Supervisory Committee under the Board of Supervisors. Mr. Wang has been an Employee Supervisor of the Company since 10 April 2012. Mr. Wang was a vice chairman of the Supervisory Committee under the sixth session of the Board of Supervisors. He was also a member of the Supervisory Committee under the sixth session of the Board of Supervisors. Mr. Wang joined the Company in 1998 and was appointed as the president of Shijiazhuang Sub-branch of the Company, and was the president of Shijiazhuang Branch of the Company from 2001 to 2002. He was a member of the preparatory team of Fuzhou Branch of the Company from 2000 to 2001, and a director of Credit Division I of the Company from 1998 to 2000. Prior to joining the Company, Mr. Wang served as a deputy director (person in charge) of Shinan Office and a vice general manager (person in change) of development department of Qingdao branch of China Everbright Bank from 1996 to 1998. He also served as a director of Qingdao branch of China Citic Bank from 1992 to 1996, an officer and a deputy director (section level) of Shandong Linyi Economic and Trade Commission and Commission for Economic Restructuring from 1987 to 1992, and a loan officer of credit division of Shandong Linyi central sub-branch of ICBC from 1986 to 1987. He studied full-time in Shandong TV University from 1983 to 1986. Mr. Wang was a planned statistician of Shandong Linyi Central Sub-branch of the PBOC from 1981 to 1983 and also worked as a statistician and loan officer of Feixian Sub-branch of the PBOC from 1980 to 1981. Mr. Wang obtained his Ph.D Degree in Economic Philosophy from Shanghai University of Finance and Economics and is a senior economist.

Mr. Guo Dong, born in 1961, is a Vice Chairman of the Board of Supervisors and the Employee Supervisor of the Company. He is also a member of the Supervisory Committee under the Board of Supervisors. Mr. Guo joined the Company in February 2015. Mr. Guo was elected as a vice chairman of the sixth session of the Board of Supervisors on 30 March 2016 and was a member of the sixth session of the Supervisory Committee under the Board of Supervisors. Mr. Guo was previously an inspector (at bureau level), a deputy inspector (at deputy bureau level), a deputy division director and the division director of Bureau V of the United Front Department of CPC Central Committee, a principal staff member and a deputy division director of Beijing Municipal Economic and Technological Cooperative Office, a staff member, a senior staff member and a principal staff member of the General Office of State Organs Work Committee of Beijing Municipal Committee

134 of CPC, a commander of 52958 Force of PLA and a worker of Changzheng Automobile Manufacturing Factory (河北省長征汽車製造廠) in Hebei Province. Mr. Guo obtained his MBA Degree from Beijing Institute of Technology.

Mr. Wang Hang, born in 1971, is a Shareholder Supervisor of the Board of Supervisors, a member of the Supervisory Committee and the Nomination and Examination Committee under the Board of Supervisors and a vice chairman of the board of directors of CMBC International, a subsidiary of the Company. Mr. Wang is a co-founder of Beijing Hosen Investment Management, Center (L.P.) and a vice chairman of the board of directors of New Hope Group Co., Ltd. and Sichuan Xinwang Bank Co., Ltd. Mr. Wang has been a non-executive director of New Hope Liuhe Co., Ltd. (listed on the SZSE (stock code: 000876)) since 29 November 2011. Mr. Wang was previously a non-executive director of the fourth to sixth sessions of the Board of the Company, a civil servant at the General Office of the PBOC, a chairman of Kunming O-Park Co., Ltd., a vice president of New Hope Group Co., Ltd., a vice chairman of Union Trust & Investment Ltd. and the chairman of the board of directors and president of Sichuan South Hope Industrial Co., Ltd. Mr. Wang obtained his Master’s Degree in Economics from Peking University.

Mr. Zhang Bo, born in 1973, is a Shareholder Supervisor of the Board of Supervisors and also a member of the Nomination and Examination Committee under the Board of Supervisors. Mr. Zhang serves as an executive director and vice chairman of China Tonghai International Financial Limited (previously known as China Oceanwide International Financial Limited, listed on the SEHK (stock code: 00952)), a vice chairman of the board of directors, executive director and president of China Minsheng Trust Co., Ltd. and a director of Oceanwide Holdings Co., Ltd. (listed on the SZSE (stock code: 000046)), Minsheng Securities Co., Ltd., Asia-Pacific Property & Casualty Insurance Co., Ltd. and Wuhan CBD Co., Ltd. Mr. Zhang was previously a vice president of the Houmashi sub-branch of Bank of China Limited. He served as a vice general manager of the risk management department and the general manager of the corporate banking department of Taiyuan Branch, head of the funding and wealth management unit of the corporate banking department, and deputy director of the preparation team of Changsha Branch of the Company. Mr. Zhang was also the chief risk officer and an executive vice president of Minsheng Financial Leasing and concurrently the president of the aircraft leasing department of Minsheng Financial Leasing. Mr. Zhang obtained his MBA Degree from Wuhan University and is studying for a Doctoral Degree in Western Economics at Fudan University. He is an economist.

Mr. Lu Zhongnan, born in 1955, is a Shareholder Supervisor of the Board of Supervisors and also a member of the Supervisory Committee and the Nomination and Examination Committee under the Board of Supervisors. Mr. Lu is an independent non-executive director of Qilu Bank Co., Ltd. (listed on National Equities Exchange and Quotations (stock code: 832666)). He was a director of the Heilongjiang Branch, a vice president of the Harbin Branch, a vice president and an executive vice president of the Heilongjiang Branch, a vice president of the Shenyang Branch of the PBOC. He was a director of Orient Group Industrial Co., Ltd., a director of New China Life Insurance Co., Ltd., a vice chairman and the president of China Minzu Securities Co., Ltd., the chairman of Shenzhen New Industry Venture Capital Co., Ltd. and a director, a vice chairman and the chairman of the executive committee of the board of directors of New China Trust Co., Ltd. Mr. Lu

135 graduated from a postgraduate course for advanced studies in economic management and is a senior economist.

Mr. Wang Yugui, born in 1951, is an External Supervisor of the Board of Supervisors and also a member of the Supervisory Committee and the chairman of the Nomination and Examination Committee under the Board of Supervisors. Mr. Wang is an independent non- executive director of Bank of Hebei Co., Ltd. and an arbitrator of the Maritime Arbitration Commission of China Council for the Promotion of International Trade. Mr. Wang was a non-executive director of the first to sixth sessions of the Board of the Company. He was also the general manager of China Shipowners Mutual Assurance Association, an executive council member of China Maritime Law Association and the China Association of Trade in Services and a supervisor of Haitong Securities Co., Ltd. (listed on the SSE (stock code: 600837) and on the SEHK (stock code: 06837)). Mr. Wang graduated from Beijing International Studies University in 1977 and is a senior economist.

Mr. Bao Jiming, born in 1952, is an External Supervisor of the Board of Supervisors and also a member of the Nomination and Examination Committee under the Board of Supervisors. Mr. Bao is a professor at the Department of Business Administration at Fudan University, an academic director of EMBA and an independent non-executive director of Ozner Water International Holding Limited (listed on the SEHK (stock code: 02014)), Youngor Group Co., Ltd. (listed on the SSE (stock code: 600177)), Antong Holdings Co., Ltd. (listed on the SSE (stock code: 600179)) and Wanxiang Qianchao Co., Ltd. (listed on the SZSE (stock code: 000559)). He was an independent non-executive director of Misho Ecology & Landscape Co., Ltd. (listed on the SZSE (stock code: 300495)) and a deputy director of the training department and an assistant dean of the Department of Business Administration at Fudan University. He was also a secretary general, lecturer, associate professor and postgraduate supervisor at Fudan Development Institute. He was a deputy director of the science and technology department at Shanghai Municipal Education Commission, the general manager of the office, general manager of overseas business department and general manager of enterprise management department, executive directors and chairman of the board of directors of an overseas subsidiary of Shanghai Industrial Investment (Holdings) Co., Ltd. Mr. Bao is a post-doctoral fellow of the School of Economics at Fudan University.

Senior Management

Mr. Zheng Wanchun, is the President of the Company. Please refer to his biography under the paragraph headed “Directors — Executive Directors”.

Ms. Chen Qiong, born in 1963, joined the Company in April 2018 and has been an Executive Vice President of the Bank since June 2018. Before joining the Company, she was a deputy chief inspector of the discipline inspection group at the Former CBRC designated by the CPC Central Commission for discipline inspection (at bureau level) from 2016 to 2018, a deputy secretary of the disciplinary inspection committee and the director- general of the staff compliance and disciplinary bureau of the Former CBRC from 2014 to 2016, the director-general of the Anhui office of the Former CBRC from 2011 to 2014, a deputy director of non-bank financial institutions supervision department of the Former

136 CBRC from 2006 to 2011 and a deputy director-general of Fujian office of the Former CBRC from 2005 to 2006. She also used to work at the policy and legal affairs department of the Former CBRC and the banking management department, Tianjin branch, the banking supervision department I, the audit supervision bureau and the education department of PBOC. Ms. Chen is a deputy to the twelfth session of the National People’s Congress and a deputy head of the sixth round of the central leading group for inspection work of the eighteenth session National People’s Congress. Ms. Chen obtained her Master’s Degree in Public Administration from Columbia University in the United States and Doctor’s degree in Finance from Hunan University.

Mr. Shi Jie, born in 1965, has been an Executive Vice President of the Company since September 2016. Mr. Shi joined the Company in October 1998 and served as the general manager of the financial planning department of Shijiazhuang Branch of the Company from March 2001. He served as the general manager of the business department of Shijiazhuang Branch of the Company from March 2001 to July 2001, and a deputy director (person in charge), a senior assistant general manager and a vice general manager of the credit assessment department of the Head Office of the Company from July 2001 to June 2008. He served as the head of preparatory team for the Changchun Branch of the Company from June 2008 to February 2009, the president of Changchun Branch of the Company from February 2009 to August 2009, the general manager of the credit assessment department of the Company from August 2009 to April 2016 and an Assistant President of the Company from August 2012 to September 2016. Prior to joining the Company, Mr. Shi served as a director of the Finance Department of Hebei University of Economics and Business from 1995 to 1998, an executive member of Taihang Industrial Co., Ltd. of Hebei Institute of Finance and Economics from 1992 to 1995, and a lecturer of the Department of Finance at Hebei University of Economics and Business from 1985 to 1992. Mr. Shi obtained his Master’s Degree in Management from Tianjin Institute of Finance and Economics.

Ms. Li Bin, born in 1967, has been an Executive Vice President of the Company since September 2016. Ms. Li joined the Company in August 1995 and served as the person in charge and director of the fund division of the international business department of the Company until October 2000, a vice general manager of the fund and capital market department of the Company from October 2000 to May 2007, the general manager of the derivative products department of the Company from May 2007 to May 2009, the president of the Financial Markets SBU of the Company from June 2009 to December 2015 and an Assistant President of the Company from August 2012 to September 2016. Prior to joining the Company, Ms. Li worked in the international department of Beijing branch of Agricultural Bank of China from 1990 to 1995. Ms. Li obtained her Ph.D Degree in Finance from the School of Finance of Renmin University of China.

Mr. Lin Yunshan, born in 1970, has been an Executive Vice President of the Company since September 2016. Mr. Lin joined the Company in February 2001, and served as the director of the Bills Business Division of the corporate business department of the Company from August 2002 to December 2003, an assistant general manager of the corporate business department of the Company from December 2003 to October 2005, a vice president of Shenzhen Branch of the Company from October 2005 to October 2007, the executive director of the office of the Corporate Banking Management Commission of

137 the Company from October 2007 to September 2009, the general manager of the corporate banking department of the Company from September 2009 to November 2012, and an Assistant President of the Company from August 2012 to September 2016. Prior to joining the Company, Mr. Lin served as a principal staff member of the supervisory department I of the PBOC from 1999 to 2001, the officer of the payment system division of the payment technology department of the PBOC from 1998 to 1999, and a deputy officer and the officer of the accounting department of the PBOC from 1993 to 1998. Mr. Lin obtained his Master’s Degree in Finance from Renmin University of China.

Mr. Hu Qinghua, born in 1963, has been the Executive Vice President of the Company since June 2018 and has concurrently been the Chief Risk Officer of the Company since February 2017. Mr. Hu joined the Company in November 1999, and served as a vice president of Nanjing Branch of the Company from November 1999 to June 2001, a deputy head of the preparatory team of Fuzhou Branch of the Company from June 2001 to August 2001, a vice president of Fuzhou Branch of the Company from August 2001 to March 2002, the president of Chengdu Branch of the Company from March 2002 to January 2007, the president of Nanjing Branch of the Company from January 2007 to March 2015, the president of Shanghai Branch of the Company from March 2015 to February 2017 and concurrently the president of Shanghai Pilot Free Trade Zone Branch of the Company from May 2016 to February 2017. Prior to joining the Company, Mr. Hu served as the president of the Chengnan sub-branch of Nanjing branch of Huaxia Bank from 1997 to 1999, a deputy head (person in charge) of the Chengnan office under Nanjing branch of Huaxia Bank from 1995 to 1997, an assistant general manager of the financial center of Jiangsu Branch of the PBOC from 1994 to 1995, the manager of the financial center from 1992 to 1994, a deputy principal staff member of the gold and silver management division of Jiangsu Branch of the PBOC from 1988 to 1992 and an officer of Jiangsu Branch of the PBOC from 1982 to 1988. Mr. Hu Qinghua obtained his EMBA Degree from Nanjing University.

Ms. Bai Dan, born in 1963, has been the Chief Financial Officer of the Company since April 2012 and also has been acting as the Board Secretary of the Company since 4 April 2018. Ms. Bai is also a vice chairwoman of the Asset and Liability Management Committee and the chairwoman of the Financial Management Committee of the Company. Ms. Bai joined the Company in 2000 and served as a vice general manager of the planning and treasury department of the Company. She also served as a vice general manager and the general manager of the accounting and settlement department and the general manager of the finance and accounting department of the Company since January 2002 and December 2008 respectively. Prior to joining the Company, Ms. Bai served as an assistant general manager, a vice general manager and the general manager of the finance and accounting department of Dalian Branch of the Bank of Communications from 1993 to 2000, and an accountant, a deputy head and the head of Dalian Development Zone Branch of the Bank of Communications from 1988 to 1993. Ms. Bai obtained her MBA Degree from Beijing Jiaotong University and is an accountant.

Mr. Zhang Yuebo, born in 1962, has been the Chief Audit Officer of the Company since February 2017. Mr. Zhang joined the Company in July 1995, and served as a member of the preparatory team of the Company in January 1996, a deputy director of the accounting

138 department of the Company from January 1996 to October 1996, a vice general manager of the Beijing administrative department and the president of Zhongguancun Sub-branch of the Company from October 1996 to May 1999, a vice general manager (person-in- charge) and the general manager of the finance and accounting department from May 1999 to May 2001, and the general manager of the planning and treasury department and the IT development department of the Company from May 2001 to February 2002. Mr. Zhang went on a government-funded study at West Virginia University from February 2002 to June 2003. He then served as the general manager and the Chief Internal Audit Executive of the internal audit department of the Company from July 2003 to May 2010, the Chief Internal Audit Executive of the Company from May 2010 to February 2017, and has been the general manager of the internal audit department of the Company since May 2010. Prior to joining the Company, Mr. Zhang was previously the director of the finance department of Trust Investment Company for Development of Rural Villages in China from March 1992 to June 1995, the director of the accounting division of Xisi sub-branch of Beijing branch of China Construction Bank from July 1983 to March 1992. Mr. Zhang obtained his Master’s Degree in Law from Peking University and his MBA Degree from West Virginia University.

Mr. Ouyang Yong, born in 1963, has been the Assistant President of the Company since April 2018 and the presidents of Shanghai Branch and Shanghai Pilot Free Trade Zone Branch of the Company since August 2017. Mr. Ouyang joined the Company in August 2001, and served as an assistant president of Qingshan Sub-branch of Wuhan Branch of the Company from August 2001 to December 2001, the assistant director of Office of Wuhan Branch of the Company from December 2001 to May 2002, the deputy director (person- in-charge) of Office of Wuhan Branch of the Company from May 2002 to July 2003, the president of Qingshan Sub-branch of Wuhan Branch of the Company from July 2003 to January 2006, the director of retail banking department of Fuzhou Branch of the Company from January 2006 to December 2006 and the director of retail banking department and the secretary of Discipline Inspection Committee of Fuzhou Branch of the Company from December 2006 to October 2007 (concurrently the general manager of legal affairs and compliance department of Fuzhou Branch of the Company from February 2007 to August 2007). Mr. Ouyang also served as the vice president (person-in-charge) of Taiyuan Branch of the Company from February 2008 to June 2010 and the president of Taiyuan Branch of the Company from June 2010 to February 2012. He was the president of Shenzhen Branch of the Company from June 2012 to November 2014. Mr. Ouyang served as the general manager of the human resources department of the Company from November 2014 to July 2017. Before joining the Company, Mr. Ouyang served as a technician of Jiangxi Dexing Copper Mine Concentrator (江西德興銅礦選礦廠) from July 1982 to October 1983 and was an officer of the youth league of Jiangxi Dexing Copper Mine Concentrator from October 1983 to June 1988 (he studied in Jiangxi University, majoring in Chinese Language (full-time programme), from September 1985 to July 1987). He also served as

139 a deputy secretary (person-in-charge) of the youth league of Jiangxi Dexing Copper Mine Concentrator from August 1988 to February 1992. Mr. Ouyang was the deputy director of shihua office of Industrial and Commercial Bank of China in Jiujiang, Jiangxi Province from February 1992 to July 1997, a vice president of rural sub-branch of Industrial and Commercial Bank of China in Jiujiang, Jiangxi Province from July 1997 and May 1998. He also served as the director of business department of Jiujiang Branch of Agricultural Development Bank of China in Jiangxi from May 1998 to August 2001. Mr. Ouyang obtained his MBA Degree from Wuhan University.

Company Secretary

Ms. Wong Wai Yee, Ella, aged 43, is a director of Corporate Services of Tricor Services Limited (“Tricor”), a global professional services provider specialising in integrated business, corporate and investor services. Ms. Wong has over 20 years of experience in the corporate secretarial field and has been providing professional corporate services to Hong Kong listed companies as well as multinational, private and offshore companies. Ms. Wong is a Chartered Secretary and a Fellow of both The Hong Kong Institute of Chartered Secretaries (“HKICS”) and the Institute of Chartered Secretaries and Administrators (“ICSA”) in the United Kingdom. Ms. Wong is a holder of the Practitioner’s Endorsement from HKICS. (Note: The Company has engaged Tricor as an external service provider and appointed Ms. Wong as the Company’s Company Secretary since 20 February 2017.)

(IV) Changes of Information of Directors and Supervisors

1. During the Reporting Period, Mr. Hong Qi, the Chairman of the Company, was appointed as a standing member of the executive committee of the twelfth session of ACFIC;

2. During the Reporting Period, Mr. Lu Zhiqiang, a Non-executive Director of the Company, ceased to be a non-executive director of Legend Holdings Corporation (listed on the SEHK (stock code: 03396));

3. During the Reporting Period, Mr. Wu Di, a Non-executive Director of the Company, was appointed as chairman of Liaoning Chamber of Commerce in Fujian Province, a council member of the first session of General Association of Liaoning Entrepreneurs and a council member of Jimei University;

4. During the Reporting Period, Mr. Song Chunfeng, a Non-executive Director of the Company, was appointed as a vice chairman of the board of directors of Quanzhoushi Jinjiang Zhongyuan Development Limited;

5. During the Reporting Period, Mr. Weng Zhenjie, a Non-executive Director of the Company, ceased to be as the chairman of the board of directors of YIMIN Asset Management Co., Ltd;

6. Mr. Liu Jipeng, an Independent Non-executive Director of the Company, ceased to be an independent non-executive director of Wanda Hotel Development Company Limited (listed on the SEHK (stock code: 00169)) since March 2019.

140 7. During the Reporting Period, Mr. Xie Zhichun, an Independent Non-executive Director of the Company, was appointed as an independent non-executive director of SuperRobotics Limited (listed on SEHK (stock code: 08176)). Mr. Xie ceased to be a non-executive director of China Smartpay Group Holdings Limited (listed on the SEHK (stock code: 08325));

8. During the Reporting Period, Mr. Peng Xuefeng, an Independent Non-executive Director of the Company, ceased to be an independent non-executive director of Huida Sanitary Ware Co., Ltd. (listed on the SSE (stock code: 603385)) and an independent non-executive director of Henan Zhongfu Industrial Co., Ltd. (listed on the SSE (stock code: 600595);

9. During the Reporting Period, Mr. Liu Ningyu, an Independent Non-executive Director of the Company, was appointed as the vice chairman of Liaoning Institute of Certified Public Accountant;

10. During the Reporting Period, Mr. Tian Suning, an Independent Non-executive Director of the Company, was appointed as an executive director and the chairman of AsiaInfo Technologies Limited (listed on the SEHK (stock code: 01675));

11. During the Reporting Period, Mr. Wang Hang, a Supervisor of the Company, was appointed as a vice chairman of the board of directors of Sichuan Xinwang Bank Co., Ltd.

(V) Appointment and resignation of Directors, Supervisors and Senior Management during the Reporting Period and the reasons therefor

1. On 4 April 2018, Mr. Fang Zhou tendered his resignation as Board Secretary and Joint Company Secretary of the Company due to personal reason;

2. On 4 April 2018, the seventh extraordinary meeting of the seventh session of the Board of the Company considered and approved the appointment of Ms. Bai Dan to concurrently serve as the Board Secretary of the Company;

3. On 4 April 2018, the seventh extraordinary meeting of the seventh session of the Board of the Company considered and approved the appointment of Mr. Ouyang Yong to serve as an Assistant President of the Company;

4. On 8 June 2018, the ninth meeting of the seventh session of the Board of the Company considered and approved the appointment of Ms. Chen Qiong and Mr. Hu Qinghua to serve as the Executive Vice Presidents of the Company;

5. On 21 June 2018, the 2017 annual general meeting of the Company elected Mr. Tian Suning as an Independent Non-executive Director of the Company. Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his term of office. On 3 September 2018, the Company issued the Announcement on the Approvals of the Qualification of Independent Non-executive Director, pursuant to which the qualification of Mr. Tian Suning as Independent Non-executive Director of the Company was approved by the CBIRC;

141 6. On 3 July 2018, Mr. Yao Dafeng and Mr. Tian Zhiping tendered their resignations as Directors and members of the related special committees under the Board in order to devote more time and attention to other business commitments;

7. On 3 July 2018, Mr. Cheng Guoqi tendered his resignation as a Supervisor and member of the related special committees under the Board of Supervisors in order to devote more time and attention to other business commitments.

8. On 12 October 2018, due to reaching the age of retirement, Mr. Liang Yutang tendered his resignation as vice chairman of the Board, Executive Director of the Company and members of the related special committees under the Board and ceased to act as the members of the related special committees under the Board.

(VI) Service contracts of Directors and Supervisors

In accordance with rules 19A.54 and 19A.55 of the Hong Kong Listing Rules, the Company has entered into contracts with its Directors and Supervisors in respect of compliance with the relevant laws and regulations, the Articles of Association of the Company and the provisions of arbitration. Except as disclosed above, the Company has not entered into and does not intend to enter into any service contracts with its Directors or Supervisors in respect of their services as Directors or Supervisors (excluding the service contracts which will expire within one year or are terminable by the Group within one year without payment of compensation, other than statutory compensation).

(VII) Directors’ interests in competing business

Mr. Liu Yonghao, a Non-executive Director of the Company, is a director of Sichuan Xinwang Bank Co., Ltd. (“Sichuan Xinwang Bank”) and holds 30% equity interest of Sichuan Xinwang Bank through New Hope Group Co., Ltd., which is controlled by him. To the best knowledge of the Company, Sichuan Xinwang Bank was established on 28 December 2016 upon the approval by China’s banking regulatory authorities and is an internet-based bank with scope of business including taking in deposits from the general public, granting loans, handling domestic and foreign settlements; handling the acceptance and discounting of negotiable instruments; issuing financial bonds; engaging in the business of bank cards; buying and selling foreign exchange and acting as an agent for the purchase and sale of foreign exchange; engaging in interbank lending; providing letter of credit services and guaranty; acting as an agent for the receipt and payment of money and acting as an insurance agent. As at the end of December 2018, total assets, net assets, net assets per share, deposits and loans of Sichuan Xinwang Bank were RMB36,210 million, RMB3,159 million, RMB1.05, RMB13,638 million and RMB25,716 million, respectively. Therefore, Sichuan Xinwang Bank is very different from the Company in terms of operation mode and operation scale. Mr. Liu Yonghao is just one of the directors of

142 Sichuan Xinwang Bank and not the chairman of the board of directors of Sichuan Xinwang Bank. In addition, in accordance with the Articles of Association of the Company, Mr. Liu Yonghao shall abstain from voting in respect of resolutions in relation to Sichuan Xinwang Bank. As such, the interest of Mr. Liu Yonghao in Sichuan Xinwang Bank is not in conflict with his responsibilities as a Director of the Company.

Mr. Wu Di, a Non-executive Director of the Company, is a director of Hangzhou United Rural Commercial Bank Co., Ltd. (“Hangzhou United Bank”) and has no interest in the equity in Hangzhou United Bank. To the best knowledge of the Company, Hangzhou United Bank was established on 5 January 2011. The customers of Hangzhou United Bank are mainly from rural areas and local communities as well as small and medium enterprises. Hangzhou United Bank is a local joint-stock bank of limited liabilities with a registered capital of RMB1.75 billion. As at the end of December 2018, total assets, net assets, net assets per share, deposits and loans of Hangzhou United Bank were RMB183,700 million, RMB17,031 million, RMB8.83, RMB137,054 million and RMB99,957 million, respectively. Therefore, Hangzhou United Bank is just different from the Company in terms of scale and geographical coverage of business. Mr. Wu Di is just one of the directors and not the chairman of the board of directors of Hangzhou United Bank. In accordance with the Articles of Association of the Company, Mr. Wu Di shall abstain from voting in respect of resolutions in relation to Hangzhou United Bank. As such, the interest of Mr. Wu Di in Hangzhou United Bank is not in conflict with his responsibilities as a Director of the Company.

Mr. Weng Zhenjie, a Non-executive Director of the Company, is a director of Chongqing Three Gorges Bank Co., Ltd. (“Chongqing Three Gorges Bank”) and a director of Hefei Science & Technology Rural Commercial Bank Company Limited (“Hefei Science & Technology Rural Commercial Bank”) and has no interest in the equity in these two banks. To the best knowledge of the Company, Chongqing Three Gorges Bank was established as a joint stock city commercial bank in February 2008. As of 31 December 2018, the unaudited total assets, net assets, net assets per share, deposits and loans of Chongqing Three Gorges Bank were RMB204,300 million, approximately RMB13,700 million, RMB2.46, RMB120,100 million and RMB64,700 million, respectively. Hefei Science &

143 Technology Rural Commercial Bank was established on 14 February 2007 and is a regional rural commercial bank providing services for small and medium enterprises, agriculture- related enterprises, rural enterprises, technological enterprises and local enterprises. As at 31 December 2018, the total assets, net assets, net assets per share, deposits and loans of Hefei Science & Technology Rural Commercial Bank were RMB96,048 million, RMB6,613 million, RMB3.67, RMB59,304 million and RMB40,408 million, respectively. Therefore, Chongqing Three Gorges Bank and Hefei Science & Technology Rural Commercial Bank are very different from the Company in terms of scale and geographical coverage of business. Mr. Weng Zhenjie is just one of the directors and not the chairman of the board of directors of each of Chongqing Three Gorges Bank and Hefei Science & Technology Rural Commercial Bank. In addition, in accordance with the Articles of Association of the Company, Mr. Weng Zhenjie shall abstain from voting in respect of resolutions in relation to either of Chongqing Three Gorges Bank and Hefei Science & Technology Rural Commercial Bank. As such, the interests of Mr. Weng Zhenjie in Chongqing Three Gorges Bank and Hefei Science & Technology Rural Commercial Bank are not in conflict with his responsibilities as a Director of the Company.

Save as disclosed above, none of the Directors holds any interests in businesses which competes or is likely to compete, either directly or indirectly, with the businesses of the Company.

144 (VIII) Interests of the Directors, Supervisors and chief executives in the securities of the Company or its associated corporations under Hong Kong laws and regulations

(I) As at 31 December 2018, the following Directors/Supervisor of the Company had the following interests in the shares of the Company as recorded in the register required to be kept by the Company pursuant to Section 336 of the SFO and as the Company is aware of:

Percentage of the Percentage relevant of all the class of issued Long/short Number shares in ordinary Name Position Class of shares position Capacity of shares Notes issue (%) shares (%) Liu Yonghao Non-executive A Long position Interest held by 1,930,715,189 1 5.44 4.41 Director his controlled corporation(s) Zhang Hongwei Non-executive A Long position Interest held by 1,315,117,123 2 3.71 3.00 Director his controlled corporation(s) Lu Zhiqiang Non-executive A Long position Interest held by 2,019,182,618 3 5.69 4.61 Director his controlled corporation(s) H Long position Interest held by 1,020,538,470 4 12.27 2.33 his controlled corporation(s) Shi Yuzhu Non-executive A Long position Interest held by 1,379,679,587 5 3.89 3.15 Director his controlled corporation(s) Wang Jiazhi Employee A Long position Beneficial owner 911,664 0.003 0.002 Supervisor

Notes:

1. The 1,930,715,189 A shares comprised 102,387,827 A shares directly held by South Hope Industrial Co., Ltd. and 1,828,327,362 A shares directly held by New Hope Liuhe Investment Co., Ltd. 51% of the issued share capital of South Hope Industrial Co., Ltd. was held by New Hope Group Co., Ltd., while New Hope Liuhe Investment Co., Ltd. was held as to 25% and 75% of its issued share capital by New Hope Group Co., Ltd. and New Hope Liuhe Co., Ltd. respectively. 24.86% and 29.08% of the issued share capital of New Hope Liuhe Co., Ltd. were held by New Hope Group Co., Ltd. and South Hope Industrial Co., Ltd. respectively. According to the SFO, New Hope Group Co., Ltd. was deemed to be interested in the 102,387,827 A shares held by South Hope Industrial Co., Ltd. and 1,828,327,362 A shares held by New Hope Liuhe Investment Co., Ltd.

As Mr. Liu Yonghao held 62.34% of the issued share capital of New Hope Group Co., Ltd., Mr. Liu Yonghao was deemed to be interested in the 1,930,715,189 A shares held by New Hope Group Co., Ltd. according to the SFO. Such interests held by Mr. Liu Yonghao and the interests held by New Hope Group Co., Ltd., Ms. Li Wei and Ms. Liu Chang, the details of which are disclosed in the section headed “Substantial shareholders’ and other persons’ interests or short positions in the shares and underlying shares of the Company under Hong Kong laws and regulations” in this Annual Report, were the same block of shares.

145 2. The 1,315,117,123 A shares were directly held by Orient Group Incorporation. 29.66% of the issued share capital of Orient Group Incorporation was held by Orient Group Co., Ltd. 94% of the issued share capital of Orient Group Co., Ltd. was held by Mingze Orient Investment Co., Ltd. (名澤東方投資有限公司), while Mingze Orient Investment Co., Ltd. was wholly-owned by Mr. Zhang Hongwei. As disclosed in the section headed “Substantial shareholders’ and other persons’ interests or short positions in the shares and underlying shares of the Company under Hong Kong laws and regulations” in this Annual Report, Orient Group Incorporation is a party to the acting in concert agreement.

3. The 2,019,182,618 A shares were held by China Oceanwide Holdings Group Co., Ltd., of which 98% of the issued share capital was held by Oceanwide Group Co., Ltd., which was wholly owned by Tohigh Holdings Co., Ltd. Mr. Lu Zhiqiang held 77.14% of the issued share capital of Tohigh Holdings Co., Ltd.

4. The 1,020,538,470 H shares (Long position) comprised 8,237,520 H shares directly held by China Oceanwide International Investment Company Limited, 604,300,950 H shares directly held by Oceanwide International Equity Investment Limited and 408,000,000 H shares directly held by Long Prosper Capital Company Limited. Long Prosper Capital Company Limited was a wholly-owned subsidiary of Oceanwide International Equity Investment Limited. 98.67% of the issued share capital of Oceanwide International Equity Investment Limited was indirectly held by Oceanwide Holdings Co., Ltd., while all of the issued share capital of China Oceanwide International Investment Company Limited and 68.02% of the issued share capital of Oceanwide Holdings Co., Ltd. were held by China Oceanwide Holdings Group Co., Ltd. (see note 3 above).

5. The 1,379,679,587 A shares were held by Shanghai Giant Lifetech Co., Ltd. 90.49% of the issued share capital of Shanghai Giant Lifetech Co., Ltd. was held by Giant Investment Co., Ltd., of which 97.86% of the issued share capital was held by Mr. Shi Yuzhu.

146 (II) As at 31 December 2018, the following Director of the Company had the following interests in Pengzhou Minsheng Rural Bank Co., Ltd., a subsidiary of the Company:

Percentage of the total Long/ Interest in the registered short registered capital Name Position position Capacity capital Note (%) Liu Yonghao Non- Long Interest held by his RMB2,000,000 1 3.64 executive position controlled corporation(s) Director

Note:

1. New Hope Group Co., Ltd. is interested in RMB2,000,000 of the registered capital of Pengzhou Minsheng Rural Bank Co., Ltd. As Mr. Liu Yonghao held 62.34% of the issued share capital of New Hope Group Co., Ltd., Mr. Liu Yonghao was deemed to be interested in the equity interest held by New Hope Group Co., Ltd. in Pengzhou Minsheng Rural Bank Co., Ltd. according to the SFO.

(III) As at 31 December 2018, the following Director of the Company had the following interests in Shanghai Songjiang Minsheng Rural Bank Co., Ltd., a subsidiary of the Company:

Percentage of the total Long/ Interest in the registered short registered capital Name Position position Capacity capital Note (%) Shi Yuzhu Non- Long Interest held by his RMB24,000,000 1 10 executive position controlled corporation(s) Director

Note:

1. Shanghai Giant Lifetech Co., Ltd. is interested in RMB24,000,000 of the registered capital of Shanghai Songjiang Minsheng Rural Bank Co., Ltd. 90.49% of the issued share capital of Shanghai Giant Lifetech Co., Ltd. was held by Giant Investment Co., Ltd., of which 97.86% of the issued share capital was held by Mr. Shi Yuzhu. Mr. Shi Yuzhu was deemed to be interested in the equity interest held by Shanghai Giant Lifetech Co., Ltd. in Shanghai Songjiang Minsheng Rural Bank Co., Ltd. according to the SFO.

(IV) As at 31 December 2018, the following Director of the Company had the following interests in Tibet Linzhi Minsheng Rural Bank Co., Ltd., a subsidiary of the Company:

Percentage of the total Long/ Interest in the registered short registered capital Name Position position Capacity capital Note (%) Shi Yuzhu Non- Long Interest held by his RMB2,500,000 1 10 executive position controlled corporation(s) Director

147 Note:

1. Shanghai Giant Lifetech Co., Ltd. is interested in RMB2,500,000 of the registered capital of Tibet Linzhi Minsheng Rural Bank Co., Ltd. 90.49% of the issued share capital of Shanghai Giant Lifetech Co., Ltd. was held by Giant Investment Co., Ltd., of which 97.86% of the issued share capital was held by Mr. Shi Yuzhu. Mr. Shi Yuzhu was deemed to be interested in the equity interest held by Shanghai Giant Lifetech Co., Ltd. in Tibet Linzhi Minsheng Rural Bank Co., Ltd. according to the SFO.

Save as disclosed above, as at 31 December 2018, none of the Directors, Supervisors or chief executives held or was deemed to hold any interests and/or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (as defined in the SFO), which were recorded in the register required to be kept under Section 352 of the SFO, or which were required to be notified to the Company and the SEHK pursuant to Divisions 7 and 8 of Part XV of the SFO and the Model Code set out in Appendix 10 to the Hong Kong Listing Rules, nor had they been granted such rights.

(IX) Contractual rights and service contracts of Directors and Supervisors

No contract of significance, to which the Company or any of its subsidiaries was a party and in which a Director or Supervisor of the Company had a material interest, subsisted during the Reporting Period. None of the Directors and Supervisors of the Company has entered into any service contract with the Company which is not terminable by the Company within one year without payment of compensation (excluding statutory compensation).

(X) Financial, business and family relationships among Directors, Supervisors and Senior Management

The Company has made enquiries to confirm that, among the members of the Board and the Board of Supervisors of the Company, Mr. Lu Zhiqiang, a Vice Chairman, is currently the chairman of the board of directors, president and ultimate controller of China Oceanwide Holdings Group Co., Ltd., while Mr. Zhang Bo, a Supervisor, is a vice chairman of the board of directors and president of China Minsheng Trust Co., Ltd, a subsidiary of China Oceanwide Holdings Group Co., Ltd. Mr. Liu Yonghao, the Vice Chairman, is currently the chairman of the board of directors and substantial shareholder of New Hope Group Co., Ltd., while Mr. Wang Hang, a Supervisor, is a vice chairman of the board of directors of New Hope Group Co., Ltd. Save as disclosed above, there are no other relationships between the members of the Board and the Board of Supervisors, including financial, business, family or other material or relevant relationships.

148 II. Employees

As at the end of the Reporting Period, the Group had 58,338 employees, of which 55,649 were employees of the Company and 2,689 were employees of the subsidiaries of the Company. Divided by professional specialties, 6,072 employees were categorised as the management, 27,873 employees as the marketing team, and 21,704 employees as the technical team. The Company had 54,338 employees with tertiary qualification or above, accounting for 97.6% of the total number of employees. During the Reporting Period, 349 employees of the Company have retired.

Employee Structure — Employee Structure — By work nature (Unit: person) By qualification

6,072 2.4%

21,704

27,873 97.6%

management team marketing team technical team tertiary qualifications others

The guiding principles of the Company’s remuneration policy were to further consolidate the important role of human resources allocation in promoting the implementation of strategies and enhancing the capital control in accordance with the strategic transformation requirements and business goals of the Company by adhering to its incentive principle which was based on input and output evaluation. It also strove to enhance the effectiveness of remuneration incentive policy in risk management and control to further improve the risk management and control of the Company.

In 2018, adhering to the strategic position of the Company and the transformation objectives of human resources management, the Company organised continuous and systematic training programmes for all employees of professional specialties from management, professional of certain business sectors, sales and operation in accordance with their job duties. The Company also put great effort in improving qualification management and promoting the establishment of online learning platform. During the Reporting Period, the Company developed 371-hour online learning materials for 1.44 million participants. The average learning hour per employee was 93 hours and the training coverage ratio was 100%. With the steadily rising percentage of employees holding CFA, CEP, CPA and other professional qualifications, the professional capability of employees of the Company improved continuously.

III. Business Network

As at the end of the Reporting Period, the Company had set up 42 branches in 41 cities across China, with 2,780 banking outlets in total.

During the Reporting Period, the Company did not open any new branch.

149 Major entities of the Company as at the end of the Reporting Period are shown as follows:

Total assets (RMB in millions) (excluding deferred Number income tax Name of entity of outlets Headcount assets) Address

Head Office 1 13,690 3,727,912 No. 2 Fuxingmennei Avenue, Xicheng District, Beijing Beijing Branch 184 3,642 697,430 No. 2 Fuxingmennei Avenue, Xicheng District, Beijing Shanghai Branch 88 2,568 376,767 No. 100 Pudong Nan Road, Pudong New Area, Shanghai Guangzhou Branch 105 2,256 226,755 Minsheng Tower, No. 68 Liede Avenue, Zhujiang New Town, Tianhe District, Guangzhou Shenzhen Branch 82 1,961 203,156 Minsheng Bank Tower, Haitian Road, Futian District, Shenzhen Wuhan Branch 139 1,502 101,126 China Minsheng Bank Tower, No. 396 Xinhua Road, Jianghan District, Wuhan Taiyuan Branch 118 1,387 99,974 3–5/F, 9–21/F, Office Building No. 3, Tower B, Shanxi International Finance Centre, No. 426 Nanzhonghuan Street, Xiaodian District, Taiyuan Shijiazhuang 169 2,131 76,518 Minsheng Bank Tower, Branch No. 197 Yu Hua Road East, Chang’an District, Shijiazhuang Dalian Branch 69 879 67,494 Minsheng International Finance Centre, No. 52 Renmin Dong Road, Zhongshan District, Dalian Nanjing Branch 206 3,000 303,848 No. 20 Hongwu Bei Road, Nanjing Hangzhou Branch 94 1,720 135,566 Jinzun, Zunbao Mansion, No. 98 Shimin Street, Qianjiang New Town, Jianggan District, Hangzhou Chongqing Branch 107 1,028 77,956 Tongjuyuanjing Building, No. 9 Jianxin Bei Road, Jiangbei District, Chongqing Xi’an Branch 81 1,136 71,872 China Minsheng Bank Tower, No. 78 Erhuan Nanlu Xiduan, Xi’an

150 Total assets (RMB in millions) (excluding deferred Number income tax Name of entity of outlets Headcount assets) Address

Fuzhou Branch 55 968 52,656 No. 282 Hudong Road, Fuzhou Jinan Branch 166 1,923 111,586 No. 229 Luoyuan Street, Jinan Ningbo Branch 44 719 42,680 No. 815 Ju Xian Road, Gaoxin District, Ningbo Chengdu Branch 132 1,397 112,721 Block 6, No. 966 North Section of Tianfu Avenue, Gaoxin District, Chengdu Tianjin Branch 55 884 63,245 China Minsheng Bank Tower, No. 43 Jianshe Road, Heping District, Tianjin Kunming Branch 101 841 43,661 Chuntian Yinxiang Building, No. 331 Huancheng Nan Road, Kunming Quanzhou Branch 48 554 25,046 No. 689 Citong Road, Fengze District, Quanzhou Suzhou Branch 42 1,134 83,312 Minsheng Finance Tower, Block 23, Times Square, Suzhou Industrial Park, Suzhou Qingdao Branch 66 953 66,387 No. 190, Hai’er Road, Laoshan District, Qingdao Wenzhou Branch 21 586 44,732 1/F, 3–5/F and 12/F, Hengha Building, No. 1707 Wenzhou Avenue, Wenzhou Xiamen Branch 24 535 31,978 Xiamen Minsheng Banking Mansion, No. 50 Hubin Nan Road, Xiamen Zhengzhou Branch 126 1,614 87,229 Minsheng Bank Tower, No. 1 CBD Shangwu Waihuan Road, Zhengdong New District, Zhengzhou Changsha Branch 50 901 60,073 Minsheng Tower, No. 189 Binjiang Road, Yuelu District, Changsha Changchun Branch 28 573 19,716 Minsheng Tower, No. 500 Changchun Street, Nanguan District, Changchun Hefei Branch 65 734 51,794 Tian Qing Building, No. 135 Bozhou Road, Hefei

151 Total assets (RMB in millions) (excluding deferred Number income tax Name of entity of outlets Headcount assets) Address

Nanchang Branch 46 558 40,692 No. 545, Huizhan Road, Honggutan New District, Nanchang Shantou Branch 41 434 20,370 1–3/F, Huajing Plaza, No. 17 Hanjiang Road, Longhu District, Shantou Nanning Branch 39 546 52,758 1–3/F, 3M/F, 30–31/F and 36/F, Block C, China Resources Building, No. 136-5 Minzu Avenue, Nanning Hohhot Branch 25 394 32,901 China Minsheng Bank Tower, Block C, Oriental Junzuo, No. 20 Chile Chuan Avenue, Saihan District, Hohhot, Inner Mongolia Shenyang Branch 64 517 23,130 No. 65 Nanjing North Street, Heping District, Shenyang Hong Kong Branch 1 211 165,036 40/F and 4106–08, 41/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong Guiyang Branch 42 485 44,409 No. 28 Yangguan Avenue, Guanshanhu District, Guiyang Haikou Branch 21 173 7,934 Zhonghuan International Plaza, No. 77 Binhai Boulevard, Longhua District, Haikou Lhasa Branch 5 165 9,100 Global Plaza, No. 8 Beijing West Road, Lhasa Shanghai Pilot Free 2 106 55,936 40/F, No. 100 Pudong South Road, Trade Zone Branch Pudong New Area, Shanghai Harbin Branch 10 219 9,593 1–6/F, Olympic Centre Area 1, No. 11 Aijian Road, Daoli District, Harbin Lanzhou Branch 11 253 14,203 1–4/F, Gansu Daily Press Plaza, No. 123 Baiyin Road, Chengguan District, Lanzhou Urumqi Branch 3 160 10,645 No. 314, Yangzijiang Road, Saybagh District, Urumqi

152 Total assets (RMB in millions) (excluding deferred Number income tax Name of entity of outlets Headcount assets) Address

Xining Branch 2 108 7,077 1–4/F, Annex Building of Telecom Industrial Tower, No. 102 Kunlun Zhong Road, Chengzhong District, Xining Yinchuan Branch 4 104 4,132 1–5/F, Block 19, Jinhaimingyue, No. 106 Shanghai West Road, Jinfeng District, Yinchuan Inter-region — — -1,784,394 adjustment

Total 2,780 55,649 5,776,712

Notes:

1. The number of institutions takes into account all types of banking establishments, including the Head Office, 42 tier-one branches and 41 business departments of branches (excluding the Hong Kong Branch), tier-two branches, remote sub-branches, county-level sub-branches, intra-city sub-branches, small-business special sub-branches, community sub-branches and small-business sub-branches.

2. Headcount of the Head Office includes the total number of the employees in SBUs, such as Credit Card Centre, other than the employees of the branches. The Credit Card Centre had 8,308 employees.

3. Inter-region adjustment arises from the reconciliation and elimination of inter-region balances.

153 Chapter 6 Corporate Governance

I. Corporate Governance Structure

Strategic Development and Investment Management Committee General Meeting Risk Management Committee

Supervisory Committee Related Party Transactions Supervision Committee Board of Supervisors Board of Directors Nomination and Nomination Committee Examination Committee Compensation and Remuneration Committee

Audit Committee

Board Secretary Chief Financial Officer Management

Asset and Liability Product and Business Innovation Management Commission Management Commission

Risk Management Commission

Marketing and Development IT Management Commission Management Commission

II. Corporate Governance Overview

During the Reporting Period, the Company further improved its systems of compliance, internal control and compliance management of related party transactions. Performances of the Directors and the Senior Management were evaluated regularly, and the Supervisors fully performed their duties to supervise the construction of corporate governance policies, further improving the quality and level of its overall corporate governance. Details are as follows:

1. During the Reporting Period, the Company had convened a total of 86 meetings, including two general meetings, 11 Board meetings, 49 meetings of the special committees of the Board, eight meetings of the Board of Supervisors and 16 meetings of the special committees of the Board of Supervisors. 376 resolutions including regular reports of the Company, working reports of the Board of Directors and the Board of Supervisors, working reports of the President, financial budgets and final account reports, profit distribution proposals and policy revisions were considered and approved at these meetings.

2. In accordance with the regulatory requirements and actual operation needs, the Company had introduced the Guidance on Data Governance of China Minsheng Bank 《中國( 民生銀行數據治理工作指引》), Administrative Measures on Compliance of China Minsheng Bank 《中國民生銀行合規管理辦法》( ), Administrative Measures on Employees’ Conduct of China Minsheng Bank 《中國民生銀行從業人員行為管理( 辦法》), Core Values of Risk Management of China Minsheng Bank 《中國民生銀行( 風險經營核心理念》), Administrative Measures on Risk Appetite of China Minsheng Bank 《中國民生銀行風險偏好管理辦法》( ), Administrative Measures on Material Risk Exposure of China Minsheng Bank 《中國民生銀行大額風險暴露管理辦( 法》), Administrative Measures on Overall Risks of Subsidiaries of China Minsheng Bank 《中國民生銀行附屬機構全面風險管理辦法》( ), Administrative Measures on Country Risks of China Minsheng Bank 《中國民生銀行國別風險管理辦法》( ) and Administrative Measures on Financial Instrument Impairment of China Minsheng Bank

154 《中國民生銀行金融資產減值管理辦法》( ). The Company has also made almost 20 amendments, including the amendments to the Administrative Measures on Related Party Transaction of China Minsheng Bank 《中國民生銀行股份有限公司關聯交易管理( 辦法》), Administrative Measures on the Consolidation of Financial Statements of China Minsheng Bank 《中國民生銀行股份有限公司併表管理辦法》( ), Measures on Internal Control of China Minsheng Bank 《中國民生銀行內部控制辦法》( ), Administrative Measures on Liquidity Risks of China Minsheng Bank 《中國民生銀行流動性風險( 管理辦法》) and Administrative Measures on Venture Fund for Senior Management of China Minsheng Bank 《中國民生銀行股份有限公司高管風險基金管理辦( 法》). The corporate governance system of the Company has been further improved by the formulation and amendment of the above rules and regulations. The Board and the Board of Supervisors continued to enhance the corporate governance of the Company by ceaselessly strengthening the implementation and the enforcement of the rules and regulations.

3. According to the Provisional Measures for Performance Evaluation of Directors 《董事( 履職評價試行辦法》), the Company completed the annual evaluation of performance of the Directors and encouraged their diligent performance of duties and self-discipline. According to the Measures for Performance Appraisal of Senior Management 《高級( 管理人員盡職考評辦法》), the Board of the Company evaluated the performance of the Senior Management, determined their remunerations based on the results of the performance appraisal in order to continuously facilitate the improvement of their capabilities in performing duties.

4. During the Reporting Period, the Board conducted special studies on some branches and subsidiaries and prepared study reports. The studies allowed the Directors to have a whole picture of the Company and guaranteed the scientific decision making of the Board. The Audit Committee of the Board of the Company conducted site visits to the Kunming Branch, Dalian Branch and Minsheng Financial Leasing to have in-depth understanding of their internal control and provide management advices. The Risk Management Committee of the Board had analysed the risk-adjusted return and submitted a report thereon to the Board of Directors as a base for strategic decisions on risks.

5. During the Reporting Period, the Related Party Transactions Supervision Committee of the Board continued to strengthen the collation and update of information on related and connected parties to ensure compliance management of related party and connected transactions. According to latest local and overseas regulatory requirements, the Company revised the management systems of related party and connected transactions, optimised management process and improved its management of related party and connected transactions. The Company endeavoured to provide better management of related party transactions by promoting the centralised credit extension by the Group, so as to assure the fairness of price as well as compliance of operation and information disclosure.

6. During the Reporting Period, according to the Articles of Association and regulatory requirements, the Board of Supervisors of the Company continued to refine its systems. It also regulated the performance of duties, explored methods of the performance of duties and proactively performed its duties to fully play its supervision role. The main duties of the Board of Supervisors include convening different meetings to consider the relevant

155 resolutions, attending every meeting of the Board and important business meetings of the Senior Management as non-voting delegates, conducting special examinations and researches, carrying out regular supervision tasks, providing opinions on supervision when necessary, and organising trainings to the Supervisors and interacting with other banks. With the efforts of all Supervisors, the Board of Supervisors duly performed their duties during the Reporting Period.

7. During the Reporting Period, based on the supervisory responsibilities and monitoring requirements, the Board of Supervisors of the Company closely monitored the operation and management of the Company. It conducted special studies and investigations on the overall risk management of the Company, the operation management of branches, management of consolidated financial statements and compliance of operation. Evaluations on performance of the Directors, Supervisors and Senior Management of the Company were also carried out. It also conducted specific examinations on the key businesses of the Company. Based on the above researches and examinations, the Board of Supervisors submitted various management proposals to the Board and the Senior Management, which facilitated the compliance of operation and healthy development of the Company.

8. During the Reporting Period, in order to fulfill the training requirement of the Directors and Supervisors imposed by the regulatory authorities and enhance their capabilities, the Company successively arranged the Directors and Supervisors to participate in trainings for directors and supervisors organised by the regulatory authorities.

9. During the Reporting Period, the Company disclosed all material information in accordance with the relevant requirements and continued to enhance the transparency of the Company, ensuring all shareholders have an equal opportunity to access the information of the Company. The management of investor relations of the Company adhered to the strategy of the Company. Through fully highlighting the strategic advantages, operation strategies and financial results of the Company, these activities strengthened the presence of the Company in the capital market. Please refer to “Information Disclosure and Investor Relations” in this chapter for details.

10. According to the internal inspection of the Company, no leakage of confidential information of the Company had been found as at the end of the Reporting Period. None of the insiders had purchased or sold the shares of the Company taking the advantage of any material share price sensitive inside information prior to the disclosure of such information. On 22 March 2012, the Rules for Insider Registration and Management 《內幕信息知情人登記管理規定》( ) was considered and approved at the 22nd meeting of the fifth session of the Board of Directors. Since then, the Company has stringently followed the relevant provisions to conduct registration of the insiders possessing insider knowledge for record.

11. The Company followed the regulatory requirements regarding corporate governance of listed companies issued by the CSRC. The Company conducted a prudent internal inspection and was not aware of any non-compliance of the Company’s corporate governance with the regulations regarding corporate governance of listed companies promulgated by the CSRC. There were no irregularities of corporate governance and no

156 information was provided to substantial shareholders or beneficial owners before such information being published to the public.

III. Rights of Shareholders

1. Procedures for shareholders to convene an extraordinary general meeting:

In accordance with the Articles of Association, the Company shall convene an extraordinary general meeting within two months at the request of the shareholders individually or jointly holding 10% or more shares of the Company.

Shareholders may request the Board of Directors to convene an extraordinary general meeting or a class meeting by the following procedures:

Shareholders individually or jointly holding 10% or more shares of the Company shall have the right to request the Board of Directors in writing to convene an extraordinary general meeting. The Board of Directors shall make a written response as to whether or not it will convene the extraordinary general meeting within 10 days upon receipt of the request.

If the Board of Directors agrees to convene the extraordinary general meeting or class meeting, a notice of convening such meeting shall be issued within five days after the resolution of the Board of Directors is passed. Approval of the relevant shareholders must be sought if the resolution contained in the notice alters the original request.

If the Board of Directors refuses to convene the extraordinary general meeting or class meeting, or fails to respond within 10 days upon receipt of the request, shareholders individually or jointly holding 10% or more shares with voting rights in the proposed meeting shall have the right to propose to the Board of Supervisors in writing to convene such extraordinary general meeting or class meeting.

If the Board of Supervisors agrees thereto, a notice of convening such extraordinary general meeting or class meeting shall be issued within five days upon receipt of the proposal. Approval of the relevant shareholders must be sought if the resolution contained in the notice alters the original request.

If the Board of Supervisors fails to give the notice of such general meeting or class meeting within the specified period, it shall be deemed to have failed to convene the meeting and shareholders who individually or jointly hold 10% or more of the Company’s shares with voting rights in the proposed meeting for not less than 90 consecutive days shall have the right to convene and preside over the meeting.

The Board of Directors and the Board Secretary shall provide assistance when necessary for general meeting convened by the Board of Supervisors or shareholders. The Board of Directors shall provide the register of shareholders as at the record date. Necessary costs of such general meetings shall be borne by the Company.

157 2. Procedures for shareholders to make enquiries to the Board:

Shareholders may make enquiries in writing to the Board through the Office of the Board of Directors of the Company at any time. The contact information of the Office of the Board of Directors is as follows:

Address: China Minsheng Bank Building, No. 2 Fuxingmennei Avenue, Xicheng District, Beijing, China Postal Code: 100031 Telephone: 86-10-58560975 Facsimile: 86-10-58560720 Email: [email protected]

3. Procedures for shareholders to put forward proposals at general meetings:

In accordance with the Articles of Association of the Company, shareholders jointly holding not less than 3% of shares of the Company shall be entitled to put forward proposals to the Company. Shareholders individually or jointly holding no less than 3% of shares of the Company may put forward provisional proposals to the meeting convener in writing 10 days prior to the date of the general meeting. Convener of such general meeting shall issue a supplementary notice of the meeting setting out the content of the provisional proposals within two days upon the receipt of the proposals.

The Board of Directors shall provide explanation for its decision to exclude any proposal of any shareholder from the agenda at the relevant general meeting. The contents of such excluded proposal and explanation of the Board of Directors shall be announced together with the resolutions of the general meeting after the close of the meeting.

In the annual general meeting, shareholders holding no less than 3% voting shares of the Company are entitled to put forward additional proposals in writing. The Company shall include the proposals that fall within the scope of power of the general meeting in the agenda of such meeting.

Shareholders may put forward proposals at general meetings through the Office of the Board of Directors, the contact information of which is set out in the section headed “2. Procedures for shareholders to make enquiries to the Board”.

IV. General Meetings

During the Reporting Period, the Company held two general meetings and considered and passed 21 resolutions. Details are as follows:

On 26 February 2018, the first extraordinary general meeting for 2018, the first class meeting of A shares for 2018 and the first class meeting of H shares for 2018 of the Company were held in Beijing in which the shareholders attended and voted on-site and online. Please refer to the announcement dated 26 February 2018 published on the website of the Company (www.cmbc.com.cn), the website of the SSE (www.sse.com.cn) and the HKEXnews website of the SEHK (www.hkexnews.hk) for details of the resolutions of the meetings. The announcement was also posted on China Securities Journal, Shanghai Securities News and Securities Times on 27 February 2018.

158 On 21 June 2018, the annual general meeting for 2017, the second class meeting of A shares for 2018 and the second class meeting of H shares for 2018 of the Company were held in Beijing in which the shareholders attended and voted on-site and online. Please refer to the announcement dated 21 June 2018 published on the website of the Company (www.cmbc.com.cn), the website of SSE (www.sse.com.cn) and the HKEXnews website of the SEHK (www.hkexnews.hk) for details of the resolutions of the meetings. The announcement was also posted on China Securities Journal, Shanghai Securities News and Securities Times on 22 June 2018.

V. Board of Directors

The Board is an independent decision-making body of the Company, responsible for execution of the resolutions passed by the general meetings; formulating the Company’s major objectives, policies and development plans; deciding on the Company’s operating plans, investment proposals and the establishment of internal management units; preparing annual financial budgets, final accounts and profit distribution plans; and appointing members of Senior Management. The Company’s management shall have the autonomy to operate the Company independently and the Board shall not interfere with the specific matters of the daily operation and management of the Company.

(I) Composition of the Board

As at the end of the Reporting Period, the Board of the Company comprises 15 members, of which seven were Non-executive Directors, two were Executive Directors and six were Independent Non-executive Directors. All Non-executive Directors held key positions in renowned enterprises and were experienced in management, finance and accounting, while the two Executive Directors had been engaged in banking operation and management for a long time with extensive professional experiences. The six Independent Non-executive Directors were experts in economics, finance, accounting, law and information technology. One of the Independent Non-executive Directors was from Hong Kong and was familiar with the IFRS and regulations of the Hong Kong capital market and equipped with extensive banking management experience.

The structure of the Board embodies qualities including professionalism, independence and diversity, which helps ensure that the Board can make decision in a rational manner.

The Company considers diversified composition of the Board is beneficial to enhance the operating quality of the Company. Therefore, the Company formulated the Policy of Board Diversity in August 2013, specifying that the Company should take various factors, including but not limited to gender, age, cultural and educational background, professional experience, skills, knowledge and term of office, into consideration in determining the members of the Board for more diversified board composition. The final candidates shall be elected based on his/her value and contributions to the Board. The Nomination Committee shall supervise the implementation of the Policy of Board Diversity. The Board shall nominate candidates for Directors for their merits and based on the requirements for the diversity of Board members.

159 The list of Directors of the Company and their profiles are shown in the section headed “Directors, Supervisors, Senior Management and Employees” of this report. The status of Independent Non-executive Directors have been indicated clearly in all communications of the Company which list the names of Directors to comply with the provisions of the Hong Kong Listing Rules.

(II) Powers of the Board

The Board of the Company may exercise the following functions and powers:

1. to convene general meetings and to report its performance to shareholders;

2. to implement the resolutions passed at the general meetings;

3. to decide on the operational plans and investment plans of the Company;

4. to formulate the proposed annual budget and annual final accounts of the Company;

5. to formulate the profit distribution plans and plans for recovery of losses of the Company;

6. to formulate proposals for increases or reductions of the registered share capital, issuance of bonds or other securities and listing plans of the Company;

7. to formulate proposals for material acquisitions, the purchase of the shares, merger, separation, dissolution and change of form of the Company;

8. to decide on external investments, purchases and sales of assets, pledges of assets, material guarantees, and related party transaction matters within the scope authorised by the general meetings of the Company;

9. to decide the internal management structure of the Company;

10. to appoint or remove the President, the Board Secretary, Chief Finance Officer and Chief Audit Officer of the Company based on the recommendations of the Chairman of the Board; to appoint or remove the Senior Management, such as Executive Vice Presidents, Assistants Presidents, Chief Risk Officer and Chief Information Officer of the Company based on the recommendations of the President and to decide on matters relating to their remunerations, reward and the imposition of any disciplinary measures;

11. to authorise the Nomination Committee under the Board to appoint or dismiss chief advisor, presidents of branches, presidents of SBUs and financial officers and approve the candidates for chairman, chief supervisor and general managers of subsidiaries;

12. to establish the basic management system of the Company;

13. to formulate proposals for any amendment to the Articles of Association of the Company;

160 14. to manage the disclosure of information of the Company;

15. to propose at the general meetings for the appointment or replacement of the accounting firms of the Company for auditing purpose;

16. to review working reports of the President of the Company and to examine the President’s performance;

17. the Board shall establish a supervisory system to ensure that the management body will formulate a code of conduct and working principles for the management staff and the business personnel at all levels and that the regulatory documents will specifically require employees at all levels to promptly report any possible conflict of interests, stipulate concrete rules and establish corresponding mechanism;

18. the Board shall establish an information reporting system that requires the Senior Management to report to the Board and Directors the operational issues of the Company regularly, and the reporting system shall cover provisions for the following issues:

(1) the scope of the information reported to the Board and Directors and the minimum reporting standards;

(2) the frequency of information reporting;

(3) the method of information reporting;

(4) the responsible party of information reporting and liabilities arising from delayed or incomplete information reporting; and

(5) the confidentiality requirements.

19. to determine matters related to issued preference shares of the Company within the scope of power authorised by the general meetings, including but not limited to the determination of repurchase, conversion and dividend payment; and

20. to exercise any other powers prescribed by the laws, administrative regulations and departmental rules, as well as any other powers conferred by the Articles of Association.

161 (III) Board meetings and contents of resolutions

During the Reporting Period, 11 Board meetings were held by the Board to deliberate on and approve major resolutions in relation to strategies, finance and operation of the Company.

Meeting Date Publication Date of disclosure

5th extraordinary meeting 8 January 2018 Shanghai Securities News, 9 January 2018 of the seventh session China Securities Journal of the Board and Securities Times 6th extraordinary meeting 5 February 2018 Shanghai Securities News, 6 February 2018 of the seventh session China Securities Journal of the Board and Securities Times 7th meeting 29 March 2018 Shanghai Securities News, 30 March 2018 of the seventh session China Securities Journal of the Board and Securities Times 7th extraordinary meeting 4 April 2018 Shanghai Securities News, 5 April 2018 of the seventh session China Securities Journal of the Board and Securities Times 8th extraordinary meeting 11 April 2018 Shanghai Securities News, 12 April 2018 of the seventh session China Securities Journal of the Board and Securities Times 8th meeting 27 April 2018 Shanghai Securities News, 28 April 2018 of the seventh session China Securities Journal of the Board and Securities Times 9th meeting 8 June 2018 Shanghai Securities News, 9 June 2018 of the seventh session China Securities Journal of the Board and Securities Times 10th meeting 29 June 2018 Shanghai Securities News, 30 June 2018 of the seventh session China Securities Journal of the Board and Securities Times 11th meeting 30 August 2018 Shanghai Securities News, 31 August 2018 of the seventh session China Securities Journal of the Board and Securities Times 12th meeting 30 October 2018 Shanghai Securities News, 31 October 2018 of the seventh session China Securities Journal of the Board and Securities Times 13th meeting 27 December 2018 Shanghai Securities News, 28 December 2018 of the seventh session China Securities Journal of the Board and Securities Times

At the above 11 meetings, 128 resolutions including four regular reports, working reports of the Board, working reports of the President, financial budgets and final account reports, profit distribution proposals, the establishment of business units and the policy revisions were considered and approved by the Board.

162 The following table sets out the attendance of Directors of the Company at the meetings of the Board in 2018:

Attendance/ Number of Directors Meetings

Hong Qi 11/11 Zhang Hongwei 11/11 Lu Zhiqiang 10/11 Liu Yonghao 11/11 Zheng Wanchun 10/11 Shi Yuzhu 10/11 Wu Di 11/11 Song Chunfeng 11/11 Weng Zhenjie 11/11 Liu Jipeng 11/11 Li Hancheng 11/11 Xie Zhichun 10/11 Peng Xuefeng 11/11 Liu Ningyu 11/11 Tian Suning 3/4 Liang Yutang 9/9 Yao Dafeng 8/8 Tian Zhiping 8/8 Cheng Hoi-chuen 6/7

Notes:

1. As Liang Yutang, Yao Dafeng, Tian Zhiping and Cheng Hoi-chuen have tendered their resignations as Directors of the Company during the Reporting Period, Tian Suning was newly appointed as an Independent Non- executive Director of the Company during the Reporting Period. The number of meetings attended by Tian Suning, Liang Yutang, Yao Dafeng, Tian Zhiping and Cheng Hoi-chuen was less than the number of meetings convened for the year.

2. Actual attendance does not include attendance by proxy. Except for the absence of the Director, Tian Suning on the 12th meeting of the seventh session of the Board, the above-mentioned Directors have appointed other Directors as their proxies to attend the meetings.

163 (IV) Implementation of the resolutions of general meetings by the Board of Directors

1. Implementation of profit distribution plan

The Board of the Company distributed dividends to the shareholders according to the profit distribution plan for the second half of 2017 and the plan of capital reserve capitalisation approved at the eighth extraordinary general meeting of the seventh session of the Board and the annual general meeting for 2017. On the basis of total share capital as at the record dates, cash dividend of the second half of 2017 of RMB0.90 (before tax) for every 10 shares was distributed to all shareholders whose names appeared on the share register. The capital reserve was capitalised from the issue of shares at premium by issuing shares to all shareholders whose names appear on the registers in a proportion of 2 shares for every 10 shares being held. The total amount of cash dividend was RMB3,284 million (before tax). The total number of shares issued by capitalisation of the capital reserve was 7,297 million shares. The cash dividend was denominated and declared in Renminbi. The holders of A shares were paid in Renminbi and the holders of H shares were paid in Hong Kong dollar. The Company distributed dividends to the holders of A shares and H shares in July 2018 in accordance with the regulations, and this distribution plan was completed.

No interim profit was distributed and no capital reserve was used for capitalisation for the interim period of 2018.

164 2. Attendance of Directors of the Company at the general meetings

The following table sets out the attendance of Directors at the general meetings in 2018:

Attendance/ Number of Directors Meetings

Hong Qi 2/2 Zhang Hongwei 2/2 Lu Zhiqiang 2/2 Liu Yonghao 2/2 Zheng Wanchun 2/2 Shi Yuzhu 2/2 Wu Di 2/2 Song Chunfeng 2/2 Weng Zhenjie 2/2 Liu Jipeng 2/2 Li Hancheng 2/2 Xie Zhichun 2/2 Peng Xuefeng 2/2 Liu Ningyu 2/2 Tian Suning 0/0 Liang Yutang 2/2 Yao Dafeng 2/2 Tian Zhiping 2/2 Cheng Hoi-chuen 2/2

Notes:

1. On 21 June 2018, the annual general meeting for 2017 of the Company elected Mr. Tian Suning as an Independent Non-executive Director of the Company. The number of meetings attended by Mr. Tian Suning was less than the number of meetings convened for the year;

2. On 21 June 2018, Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his term of office of six years;

3. On 3 July 2018, Mr. Yao Dafeng and Mr. Tian Zhiping rendered their resignation reports to the Company and ceased to be Directors and members of the related special committees under the Board effective from 3 July 2018;

4. On 12 October 2018, Mr. Liang Yutang tendered his resignation as the Vice Chairman and Executive Director and ceased to be a member of the related special committees of the Board as he has reached the age of retirement.

165 (V) Performance of Independent Non-executive Directors

The Board of the Company comprises six Independent Non-executive Directors. The qualifications of Independent Non-executive Directors are in compliance with the provisions of the CBIRC, the CSRC, and the listing rules of the SSE and the Hong Kong Listing Rules. During the Reporting Period, these Independent Non-executive Directors duly performed their duties by maintaining communication with the Company through various means, such as attending office in the Bank, conducting on-site visits, holding special investigation and conferences, attending the Board meetings and meetings of the special committees of the Board conscientiously, making suggestions actively and emphasizing minority shareholders’ interests.

1. On-duty policy for Independent Non-executive Directors

In order to fully perform the functions of Independent Non-executive Directors and improve the effectiveness of the Board, the Board of the Company has adopted an on-duty policy since March 2007, pursuant to which Independent Non-executive Directors are required to work in the Company for one to two days per month. The Company provided offices and facilities for the Independent Non-executive Directors. During the Reporting Period, all Independent Non-executive Directors have complied with the on-duty policy. The main duties of the Independent Non-executive Directors while they are on duty are: to study the works of their respective committees; to review working reports of the Senior Management or various departments of the head office; to visit the branches of the Company for special investigation and conferences; and to supervise the setting up and amending any relevant corporate governance policy. It is an achievement for the Company to implement the on-duty policy of Independent Non- executive Directors, which provides important support and assurance for Independent Non-executive Directors to give full effect of their expertise to provide professional opinion to the decision-making of the Board. The implementation of the policy enhanced the rationality and independence of the decision-making of the Board.

2. Rules governing Independent Non-executive Directors’ work on Annual Reports

In order to further improve the corporate governance of the Company with an aim to fully perform the duties of Independent Non-executive Directors in governing information disclosure so as to ensure the truthfulness, accuracy, completeness and timeliness of the information disclosed in the annual reports of the Company, the Working Rules for Involvement of Independent Non-executive Directors in the Preparation of Annual Report 《獨立非執行董事年報工作制度》( ) was considered and approved at the 16th meeting of the fourth session of the Board.

Pursuant to the rules, the Independent Non-executive Directors are required to perform their responsibilities and duties diligently in the process of preparation and disclosure of the annual reports of the Company. The management of the Company shall fully report the annual operating results and the progress of material issues to the Independent Non- executive Directors within 60 days after the end of each fiscal year. The Independent Non-executive Directors may conduct investigation on certain issues if necessary. The Independent Non-executive Directors shall verify the qualification of the accountants to be engaged by the Company and the qualification of the certified public accountants responsible for the auditing of the annual reports of the Company. Upon the issuance of the preliminary audit opinion, the Independent Non-executive Directors shall hold

166 at least one meeting with the certified public accountants responsible for the auditing of the annual reports of the Company to discuss the issues identified in the auditing process before a Board meeting is convened to review the annual reports.

Pursuant to the rules, the Independent Non-executive Directors have performed their responsibilities and duties diligently and strictly complied with the relevant rules and regulations of the Company and the regulatory authorities in preparation and disclosure of the 2018 Annual Report of the Company. The Independent Non-executive Directors have received the reports from the management of the Company on the operation and development of material issues of 2018, maintained continuous communication with the accounting firm in respect of the annual auditing and reviewed auditing plans, report on pre-auditing and auditing from the accounting firms.

3. Other duties of Independent Non-executive Directors

The Independent Non-executive Directors shall give independent opinions on the following issues at Board meetings or general meetings:

(1) Nomination, appointment and removal of Directors;

(2) Appointment or removal of Senior Management;

(3) Profit distribution plan;

(4) Remuneration of Directors and Senior Management;

(5) Legality and fairness of major related party and connected transactions between the shareholders, de facto controllers and their respective related companies and the Bank, and whether the Bank has taken effective measures to collect outstanding payments;

(6) Engagement of external auditors;

(7) Matters that may cause substantial loss of the Bank;

(8) Issues that Independent Non-executive Directors considered may prejudice the legal interests of depositors, minority shareholders and other relevant interested parties;

(9) Other issues stipulated by the laws and regulations, normative documents and the Articles of Association of the Bank.

The Independent Non-executive Directors of the Company also played important roles in various special committees of the Board. They acted as the convener of the meetings of the Compensation and Remuneration Committee, Audit Committee, Nomination Committee, Related Party Transactions Supervision Committee and Risk Management Committee under the Board. The majority of members of the Compensation and Remuneration Committee, Nomination Committee, Related Party Transactions Supervision Committee and Audit Committee were Independent Non-executive Directors. At least one Independent Non-executive Director in each of the Audit Committee and Related Party Transactions Supervision Committee has professional accounting experience.

167 4. Attendance of the Independent Non-executive Directors at meetings during the year

All Independent Non-executive Directors of the Company were conscientious and active in attending the Board meetings during the Reporting Period.

Attendance of the Independent Non-executive Directors at the Board meetings in 2018 Number of Attendance Attendance Directors meetings in person by proxy

Liu Jipeng 11 11 0 Li Hancheng 11 11 0 Xie Zhichun 11 10 1 Peng Xuefeng 11 11 0 Liu Ningyu 11 11 0 Tian Suning 4 3 0 Cheng Hoi-chuen 7 6 1

Notes:

1. On 21 June 2018, the annual general meeting for 2017 of the Company elected Mr. Tian Suning as an Independent Non-executive Director of the Company;

2. Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his term of office of six years;

3. The number of meetings attended by the Independent Non-executive Directors, Tian Suning and Cheng Hoi-chuen, was less than the number of meetings convened for the year. (VI) Confirmation of independence of Independent Non-executive Directors

All six Independent Non-executive Directors of the Company are not subject to the factors specified in rule 3.13 of the Hong Kong Listing Rules which would put their independence into question. Moreover, the Company has received the annual confirmation of independence from each of the Independent Non-executive Directors in accordance with the Hong Kong Listing Rules. Therefore, the Company believes that all Independent Non- executive Directors are independent.

(VII) Chairman of the Board and President

The roles and duties of the Chairman of the Board and the President of the Company are performed by different persons with clearly defined responsibilities in line with the Hong Kong Listing Rules.

During the Reporting Period, the Chairman of the Board, Mr. Hong Qi, was responsible for leading the Board and acting as the Chairman of the Board meetings. He shall ensure that all Directors were well informed of the issues to be discussed during the Board meetings. He was also responsible for the management of the operation of the Board and ensured that the Board shall discuss all major and relevant issues in a timely and constructive manner. In order to allow the Board to discuss all major and relevant issues in time, the Chairman

168 of the Board maintained close contact with relevant Senior Management to ensure that the Directors can promptly receive appropriate, complete and reliable information for their consideration and review.

During the Reporting Period, Mr. Zheng Wanchun, the President of the Company, was responsible for the business operation of the Company and the implementation of strategies and business plans of the Company.

(VIII) Securities transactions by Directors, Supervisors and relevant employees

The Company has adopted its own code of conduct of the Directors and the Supervisors regarding transactions in securities, on terms no less exacting than the Model Code as set out in the Appendix 10 to the Hong Kong Listing Rules. The Company has made specific enquiries to all Directors and Supervisors who have confirmed that they have complied with the above-mentioned Code for the year ended 31 December 2018. The Company also formulated the guidelines for dealings in securities of the Company by employees, which are no more lenient than the Model Code. The Company is not aware of any non- compliance with these guidelines by the relevant employees.

(IX) Responsibility statement of Directors regarding preparation of financial statements

All Directors of the Company had committed their responsibilities for the preparation of the financial statements of the Company for the year ended 31 December 2018.

VI. Responsibilities of Corporate Governance and Special Committees of the Board

The corporate governance of the Company is vested in the Board. The duties include: (1) to develop and review the corporate governance policy and practice of the Company; (2) to review and monitor the training and continuous professional development of Directors and Senior Management; (3) to review and monitor the policies and practices in compliance with legal and regulatory requirements of the Company; (4) to formulate, review and monitor the code of conduct for employees and Directors; and (5) to review the compliance of the Company with the provisions of the Corporate Governance Code and disclosure in the Corporate Governance in the Annual Report.

The major works of corporate governance performed by the Board of the Company in 2018 were as follows: the Board had conducted due diligence appraisals of Directors and Senior Management, organised and carried out training of Directors and formulated and amended various corporate governance policies of the Company in accordance with domestic and overseas regulatory requirements, including the Articles of Association, Guidance on Data Governance of China Minsheng Bank 《中國民生銀行數據治理工作指引》( ), Administrative Measures on Employees’ Conduct of China Minsheng Bank 《中國民生銀行( 從業人員行為管理辦法》), Administrative Measures on Related Party Transaction of China Minsheng Banking Corp., Ltd. 《中國民生銀行股份有限公司關聯交易管理辦法》( ), Administrative Measures on the Consolidation of Financial Statements of China Minsheng Banking Corp., Ltd. 《中國民生銀行股份有限公司併表管理辦法》( ) and Measures on Internal Control of China Minsheng Bank 《中國民生銀行內部控制辦法》( ). The Board also confirmed that, save as disclosed in this Annual Report, the Company had complied with the code provisions of Appendix 14 to the Hong Kong Listing Rules throughout 2018 based on its review.

169 Composition, functions and powers of the six special committees of the Board and their works in 2018 are as follows:

(I) Strategic Development and Investment Management Committee

1. Composition of the Strategic Development and Investment Management Committee and meetings in 2018

On 1 January 2018, the Strategic Development and Investment Management Committee of the seventh session of the Board had nine members. The chairman was Hong Qi and the members were Zhang Hongwei, Lu Zhiqiang, Liu Yonghao, Zheng Wanchun, Shi Yuzhu, Yao Dafeng, Weng Zhenjie and Liu Jipeng.

On 29 June 2018, according to the Resolution regarding the Change of Members of Special Committees of the Seventh Session of the Board of the Company 《關於調整( 公司第七屆董事會部分專門委員會成員的決議》) approved at the tenth meeting of the seventh session of the Board. The Strategic Development and Investment Management Committee of the seventh session of the Board had nine members. The chairman was Hong Qi and the members were Zhang Hongwei, Lu Zhiqiang, Liu Yonghao, Zheng Wanchun, Shi Yuzhu, Yao Dafeng, Weng Zhenjie and Tian Suning.

On 3 July 2018, as Mr. Yao Dafeng tendered his resignation as Director and member of the related special committees of the Board of the Company, the composition of the Strategic Development and Investment Management Committee of the seventh session of the Board was adjusted to eight members. The chairman was Hong Qi and the members were Zhang Hongwei, Lu Zhiqiang, Liu Yonghao, Zheng Wanchun, Shi Yuzhu, Weng Zhenjie and Tian Suning.

The main functions and duties of Strategic Development and Investment Management Committee shall be as follows:

Studying and formulating long-term development strategies and long- and medium- term development outlines of the Company, and advising to the Board of Directors; supervising and evaluating the implementation of the strategies and providing proposals; providing proposals for adjusting the strategies based on the changes of operating environment; studying and formulating relevant systems for outward investments, proposing suggestions and plans for material investment decisions of the Company (including investments in fixed assets and equities); management of consolidated financial statements of the Bank and its subsidiaries; studying and formulating relevant systems for merger and acquisition, studying strategies for merger and acquisition and suggesting implementation proposals, including merging targets, acquisition methods and reorganisation; studying and formulating diversified operation and development model, studying and formulating the establishment and management model of a financial group; studying and implementing other major issues relevant to the strategic development of the Bank.

170 The Strategic Development and Investment Management convened ten meetings, reviewed 49 proposals and received nine reports in 2018. The attendance record is as follows:

Attendance/ Number of Members Meetings

Non-executive Directors Zhang Hongwei 10/10 Lu Zhiqiang 10/10 Liu Yonghao 10/10 Shi Yuzhu 10/10 Yao Dafeng 5/5 Weng Zhenjie 10/10 Executive Directors Hong Qi (chairman of the committee) 10/10 Zheng Wanchun 10/10

Independent Non-executive Directors Liu Jipeng 5/5 Tian Suning 5/5

Notes:

1. On 29 June 2018, the composition adjustment of some of the special committees of the Board was passed on the tenth meeting of the seventh session of the Board. Liu Jipeng, a Director, ceased to serve as the member of the Strategic Development and Investment Management Committee. Tian Suning, a Director, was elected as a member of the Strategic Development and Investment Management Committee to fill the vacancy;

2. On 3 July 2018, Mr. Yao Dafeng tendered his resignation as a Director and member of the related special committees of the Board;

3. The number of meetings attended by the Directors, Mr. Liu Jipeng, Mr. Tian Suning and Mr. Yao Dafeng, was less than the number of meetings convened for the year. 2. Major achievements of the Strategic Development and Investment Management Committee in 2018

During the Reporting Period, under the overall strategic guidance of the Board, the Strategic Development and Investment Management Committee actively carried out decision support, strategic management, capital management, investment management, management of subsidiaries and the consolidated financial statements of the Group, protection of consumers’ rights and interests and data management in order to thoroughly fulfill its duties.

(1) Execution of supports on decision-making

The Strategic Development and Investment Management Committee further refined the process of operation and decision making of the committee to improve the overall support of decision making. It convened 10 meetings to discuss material decision issues of the Company, which reviewed 49 proposals and received nine reports. It fully discharged its role in support of the major decisions of the Company.

171 (2) Active promotion of strategic management

The Strategic Development and Investment Management Committee actively pushed forward reform, transformation and formulation of implementation scheme of the medium-and long-term development plan. It initiated the implementation of various major strategic decisions. With focus on medium- and long-term development strategy and investment plan, it conducted a series of forward- looking, strategic and practical researches.

(3) Continuous optimisation of capital management

The Strategic Development and Investment Management Committee continued to optimise the capital management system, prepare the annual capital planning, implement capital replenishment and capital monitoring and coordinate and complete the decision-making procedures of profit distribution for the Company.

(4) Continuous promotion of investment management

The Strategic Development and Investment Management Committee further strengthened the management of outward investments and pressed ahead the development strategies of the Group so as to facilitate the implementation of major investment decisions and enhance the overall service level. In addition, based on the relevant decisions of the Board, it organised and implemented major fixed assets investment projects and monitored the effective implementation of major proposals.

(5) Enhancement of the management of subsidiaries

The Strategic Development and Investment Management Committee further improved corporate governance of subsidiaries, optimised the corporate governance system, improved the management system and mechanism of subsidiaries and strictly implemented relevant decisions of the Board.

(6) Continuous optimisation of the management of consolidated financial statements of the Group

The Strategic Development and Investment Management Committee refined the management of the Group and revised the rules and regulations of the management of consolidated financial statements. It also strengthened supervision and appraisal of the Board and pressed ahead the establishment of standardised risk management system so as to improve the overall coordination of the Group.

(7) Improvement of the protection of rights and interests of customers

The Strategic Development and Investment Management Committee received special reports from the Senior Management on the protection of rights and interests of customers. It established a mechanism under the Board on guiding and supervising the protection of rights and interests of customers in order to implement protection initiatives of the Company.

172 (8) Optimisation of data management

The Strategic Development and Investment Management Committee carried out data management of the Company. In accordance with the regulatory requirements, it specified the structure and improve the fundamental rules of data management.

(II) Nomination Committee

1. Composition of the Nomination Committee and meetings in 2018

On 1 January 2018, the Nomination Committee of the seventh session of the Board had nine members. The chairman was Hong Qi and the members were Zhang Hongwei, Liu Yonghao, Tian Zhiping, Cheng Hoi-chuen, Li Hancheng, Xie Zhichun, Peng Xuefeng and Liu Ningyu.

On 21 June 2018, Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his term of office of six years. On 29 June 2018, the composition of the Nomination Committee was adjusted to nine members on the 10th meeting of the seventh session of the Board. The chairman was Peng Xuefeng and the members were Hong Qi, Zhang Hongwei, Liu Yonghao, Shi Yuzhu, Liu Jipeng, Li Hancheng, Xie Zhichun and Liu Ningyu.

The main functions and duties of Nomination Committee shall be as follows:

Reviewing the structure, composition and diversity of members of the Board of Directors (including but not limited to the gender, age, cultural and educational background, professional experience, skills, knowledge and term of office) and making suggestions to the Board of Directors for implementation of the strategies of the Bank annually; studying and formulating selection procedures and standards of appointment of Directors and Senior Management of the Head Office of the Bank and making suggestions to the Board of Directors. When identifying appropriate candidates for Directors, the value of the relevant candidates shall be considered, while objective conditions should be fully examined for the benefit of the diversity of members of the Board of Directors; identifying qualified candidates for Directors and the Senior Management of the Head Office of the Bank; identifying and selecting outstanding candidates for operation management widely and making suggestions to Senior Management of the Head Office of the Bank on candidates for departments of the Head Office, senior management of branches and senior technical experts; conducting preliminary review on the qualification of candidates for Directors and Senior Management of the Head Office and making suggestions to the Board of Directors; examining the qualification of candidates for Independent Non-executive Directors in terms of independence, professional knowledge, experience and capability; examining the independence and performance of duties of Independent Non-executive Directors on a regular basis; conducting preliminary review on the qualification of candidates for chief specialists of the Bank, presidents of branches, presidents of SBUs, persons in charge of finance and Chairman of the Board of Directors, Chairman of the Board of Supervisors and general managers proposed for subsidiaries before appointments; formulating work procedures for alternative Directors and Senior Management of the Head Office under special circumstances, and nominating candidates to fill the

173 vacancy as appropriate; guiding and supervising the establishment of a comprehensive data pool for development and management talent of the Bank; reviewing the time Directors spent to perform their duties on a regular basis; reviewing the Policy of Board Diversity for the composition of the Board of Directors, the measureable targets set up for executing the diversification policy and the fulfillment of such targets as appropriate, and disclosing review results annually in the “Corporate Governance Report”; performing responsibilities specified by the laws, regulations and the listing rules of the places where the Bank is listed; fulfilling other functions and duties of the Committee authorised by the Board of Directors. Please refer to the section headed “Chapter 6 Corporate Governance — V. Board of Directors — (I) Composition of the Board” for details of the Policy of Board Diversity.

The Nomination Committee convened eight meetings and reviewed 14 proposals in 2018. The attendance record is as follows:

Attendance/ Number of Members Meetings

Non-executive Directors Zhang Hongwei 8/8 Liu Yonghao 8/8 Shi Yuzhu 4/4 Tian Zhiping 4/4

Executive Director Hong Qi (chairman of the committee before 29 June 2018) 8/8

Independent Non-executive Directors Peng Xuefeng (chairman of the committee since 29 June 2018) 8/8 Liu Jipeng 4/4 Li Hancheng 8/8 Xie Zhichun 8/8 Liu Ningyu 8/8 Cheng Hoi-chuen 3/4

Notes:

1. On 29 June 2018, the composition adjustment of some of the special committees of the Board was passed on the 10th meeting of the seventh session of the Board. Tian Zhiping and Cheng Hoi-chuen, the Directors, ceased to serve as the members of the Nomination Committee. Shi Yuzhu and Liu Jipeng, the Directors, were elected as members of the Nomination Committee to fill the vacancies;

2. On 21 June 2018, Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his term of office of six years;

3. On 3 July 2018, Mr. Tian Zhiping tendered his resignation as a Director and member of the related special committees of the Board;

4. The number of meetings attended by the Directors, Shi Yuzhu, Tian Zhiping, Liu Jipeng and Cheng Hoi- chuen, was less than the number of meetings convened for the year.

174 2. Nomination procedures and process adopted by the Nomination Committee

(1) Nomination procedures for Director candidates

(i) General procedures for the nomination of Director candidates

The general nomination and election procedure of Directors of the Bank shall be as follows:

(1) Subject to the number of board members stipulated in the Articles of Association and according to the number of directors to be elected, the previous session of the Board may propose a list of director candidates after an extensive consultation of the shareholders; shareholders who individually or jointly hold 3% or more of the total voting shares of the Bank could also propose candidates to the Board of Directors.

(2) The Nomination Committee of the Board shall conduct a preliminary review on the qualifications and eligibility of the candidates for directors, and qualified candidates shall be submitted to the Board of Directors for consideration. Upon approval, the Board of Directors shall submit a written proposal for the candidates of directors to the shareholders’ general meeting.

(3) Any director candidate shall, prior to the convening of the shareholders’ general meeting, make written commitments that he/she agrees to accept the nomination, undertakes that the truthfulness and completeness of the information disclosed, and warrants that he/she will effectively perform his duties and functions as a director after he/she is elected.

(4) The Board of Directors shall disclose to shareholders, in accordance with the laws, regulations and the Articles of Association, detailed information of the director candidates before the shareholders’ general meeting is convened, so that the shareholders can have sufficient knowledge about the candidates before voting.

(5) Each director candidate shall be voted on a one-by-one basis at the shareholders’ general meeting.

(6) In case of urgent need of filling vacant position for directors, the Nomination Committee of the Board of Directors or shareholders who are eligible to make nominations shall propose candidates to the Board of Directors for consideration and approval, and the candidates shall be voted and elected at the shareholders’ general meeting.

(7) A shareholder and its associates may not propose nomination for candidates of directors and supervisors simultaneously; where the director (supervisor) candidate proposed by a shareholder and its associates has been elected as a director (supervisor), such shareholder may not propose

175 other supervisor (director) candidates before the expiry of the term of office or replacement of such elected director (supervisor); the number of director candidates nominated by a shareholder and its associates shall not exceed one third of the total members of the Board of Directors in principle, except as otherwise prescribed by the State.

If a shareholder or the Board of Supervisors raises an objection to the list of Director candidates, a new proposal should be submitted in accordance with the Articles of Association of China Minsheng Bank, pursuant to which the Nomination Committee shall examine the qualification of relevant candidates and submit the proposal to the Board of Directors for whether the proposal should be further submitted at the general meeting.

(ii) Special procedures for nomination of Independent Non-executive Director candidates

Independent Non-executive Directors shall be nominated, elected and replaced in accordance with the following requirements:

(1) Candidates of Independent Non-executive Directors may be nominated by any shareholder(s) holding 1% or more of the total voting shares of the Bank individually or collectively, the Board of Directors or the Board of Supervisors of the Bank and shall be elected by the shareholders’ general meeting. A shareholder who has already nominated the candidate for director shall have no right to nominate an Independent Non-executive Director.

(2) Nominators shall seek the consent of the nominees prior to the nomination; possess full acquaintance of the occupation, education level, professional qualification, detailed working experiences and all part-time jobs of the nominees; and provide opinions regarding the nominees’ qualification and independence to serve as Independent Non-executive Directors. Nominees shall make a public statement that he/she has no relation with the Bank which may interfere with his/her independent and objective judgment.

Appointment of Independent Non-executive Directors shall follow the market principle, and the Nomination Committee of the Board shall examine the qualifications of the nominated candidates for Independent Non-executive Director, mainly considering their independence, expertise, experience and capabilities, etc.

Before convening the shareholders’ general meeting for the election of Independent Non-executive Directors, the Board of Directors of the Bank shall announce the above information as required.

176 (3) Before convening the shareholders’ general meeting for the election of Independent Non-executive Directors, the Bank shall submit all information of the nominees to the banking regulatory authority of the State Council, the securities regulatory authority of the State Council, the local branch of the securities regulatory authority of the State Council in the locations of the Bank and stock exchanges on which the shares of the Bank are listed. If there is objection raised by the Board of Directors regarding to the nominees, the written opinions of the Board of Directors shall also be submitted at the same time.

Nominees disagreed by the regulatory authorities may be selected as candidates of directors of the Bank but not candidates of Independent Non-executive Directors. The Board of Directors shall illustrate whether candidates of Independent Non-executive Directors are disagreed by regulatory authorities in the shareholders’ general meeting for election of Independent Non-executive Directors.

(2) Criteria and standards of selection and recommendation of Director candidates

Directors shall possess expertise and experiences to perform his/her duties as well as qualify the requirements of the banking regulatory authorities of the State Council. Qualification of Directors shall be reviewed by the banking regulatory authorities of the State Council.

Independent Non-executive Director shall possess the following basic requirements:

1. obtains qualifications to serve as directors of listed commercial banks in accordance with the laws, administrative regulations and other relevant provisions;

2. obtains a bachelor degree or above or with relevant professional qualifications in middle level or above;

3. fulfills the independence requirement specified in the Articles of Association;

4. is equipped with a basic knowledge of the operation of listed commercial banks, and is familiar with relevant laws, administrative regulations, rules and regulations;

5. is able to read, understand and analyse commercial bank’s credit statistics and financial statements;

6. has more than five years of legal, economic, commercial banking or other working experience necessary for performing duties as Independent Non- executive Directors;

7. meets the requirements of domestic and overseas regulatory authorities and the relevant Listing Rules regarding the qualifications of Independent Non- executive Directors, and obtains other qualifications to serve as Directors specified in the Articles of Association.

177 Independent Non-executive Directors shall be independent. The following persons shall not serve as Independent Non-executive Directors:

1. an employee of the Company, or is the lineal relative, main social relation (lineal relative refers to spouse, parents, children etc.; main social relation refers to brother and sister, father-in-law, mother-in-law, daughter-in-law, son- in-law, brother-in-law, sister-in-law etc.) of such employee;

2. natural person shareholders directly or indirectly holding 1% or more of the total issued shares of the Bank or being the top 10 shareholders of the Bank and their immediate relatives;

3. employees of the shareholders directly or directly holding 5% or more of the total voting shares of the Bank or being the top five shareholders of the Bank and their immediate relatives;

4. has any of the three factors listed above in the past one year;

5. provides financial, legal, consulting services to the Bank or its subsidiaries;

6. other persons as specified by the banking regulatory authority of the State Council and the securities regulatory authority of the State Council; and

7. other persons as specified by laws, regulations, normative documents and the Articles of Association.

3. Major achievements of the Nomination Committee in 2018

During the Reporting Period, the Nomination Committee of the Board duly performed the following duties in respect of evaluation of the independence of the annual work of the Independent Non-executive Directors, examination and approval of the qualification of Senior Management and recruitment and election of Independent Non-executive Directors in accordance with the Working Plan of the Nomination Committee 《提名委員會工作計劃》( ) formulated at the beginning of the year:

(1) Evaluation of the independence of the annual work of the Independent Non- executive Directors

The Nomination Committee has reviewed the Annual Duty Report of Independent Non-executive Directors for 2017 《獨立非執行董事( 2017年度述職報告》) of the six Independent Non-executive Directors of the Company according to their annual work, annual duty performance, preparation of annual report and key issues of the Company and submitted the Annual Duty Report to the shareholders at the annual general meeting. The Nomination Committee is of the opinion that during the Reporting Period, the six Independent Non-executive Directors of the Company have independently and objectively performed their duties, diligently supervised the compliance with respect to the development of the businesses and significant matters of the Company, effectively enhance the corporate governance and protected the interests of the Company and the shareholders, especially the interests of minority shareholders.

178 (2) Recruitment and election of Independent Non-executive Directors

During the Year, the former Independent Non-executive Director, Cheng Hoi- chuen had completed his term of office of six years. In order to ensure that the composition of the Board is in compliance with the laws and regulations, the Nomination Committee promptly carried out extensive recruitment and selection of candidates for Independent Non-executive Director to fill the vacancy. In accordance with regulatory requirements, the requirement of board diversity and the reforms and transformation of the Company, the Nomination Committee nominated Mr. Tian Suning as the candidate for Independent Non-executive Director to the Board and submitted the nomination to shareholders’ general meeting, which considered and approved the nomination. This ensured that the number of Independent Non-executive Directors complies with the regulatory requirements and the Articles of Association of the Company, as well as the compliance operations of the Board.

(3) Review of the qualification of proposed Senior Management of the Head Office

The Nomination Committee conducted preliminary reviews on the qualification of proposed Senior Management of the Head Office and submitted the same to the Board for consideration according to the development strategies and the needs of the Company and the biographies of the candidates.

(4) Examination on the qualifications of the presidents of branches, presidents of SBUs and senior executives of subsidiaries

The Nomination Committee continued to perform its duties of making decisions on selection and appointment of senior executives and improve the nomination procedure in a normative, transparent and efficient manner. The Nomination Committee considered more than 19 candidates for presidents of branches, presidents of SBUs and candidates for chairmen of the board, chairmen of the Board of Supervisors and general managers of subsidiaries during the year.

(III) Compensation and Remuneration Committee

1. Composition of the Compensation and Remuneration Committee and meetings in 2018

On 1 January 2018, the Compensation and Remuneration Committee of the seventh session of the Board had nine members. The chairman was Cheng Hoi-chuen and the members were Lu Zhiqiang, Liang Yutang, Zheng Wanchun, Wu Di, Liu Jipeng, Li Hancheng, Xie Zhichun and Peng Xuefeng.

On 21 June 2018, Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his term of office of six years. On 29 June 2018, the composition of the Compensation and Remuneration Committee was adjusted to nine member on the 10th meeting of the seventh session of the Board. The chairman was Tian Suning and the members were Lu Zhiqiang, Liang Yutang, Zheng Wanchun, Wu Di, Liu Jipeng, Li Hancheng, Xie Zhichun and Peng Xuefeng.

179 On 12 October 2018, the former Vice Chairman of the Company, Mr. Liang Yutang ceased to be the member of the Compensation and Remuneration Committee as he has reached the age of retirement. The composition of the Compensation and Remuneration Committee was adjusted to eight members. The chairman was Tian Suning and the members were Lu Zhiqiang, Zheng Wanchun, Wu Di, Liu Jipeng, Li Hancheng, Xie Zhichun and Peng Xuefeng.

The main functions and duties of the Compensation and Remuneration Committee shall be as follows:

Studying and formulating remuneration policies, remuneration systems and proposals of the Directors and Senior Management of Head Office for the establishment of formal and transparent procedures, making recommendations to the Board of Directors and supervising the implementation of remuneration policies, remuneration systems and proposals; studying and formulating performance appraisal standards and proposals of the Directors and Senior Management of Head Office; studying and formulating due diligence appraisal system of the Directors and Senior Management of Head Office, making recommendations to the Board of Directors and carrying out regular evaluations; considering and determining the classes of positions and remuneration of Senior Management of Head Office; studying and formulating the proposal of share option incentive scheme of the Bank and its subsidiaries and its implementation method; reviewing the material remuneration system of the Bank, making recommendations on improvement and supervising its implementation; studying and formulating the resignation policy of the Directors and Senior Management of Head Office; determining the remuneration and incentive and restraint proposals for Directors and Senior Management of Head Office, including their benefits- in-kind, pension and compensations (including compensation for loss of office or appointment or removal from office or appointment which is not due to misconduct or termination of office or appointment) and making recommendations to the Board of Directors; reviewing and approving compensation payment to the Directors and Senior Management for their loss or termination of office or appointment or their removal or dismissal due to misconduct, which shall be determined based on the relevant contracts or, in the absence of the relevant contracts, fair and reasonable; performing duties stipulated by the laws, regulations and listing rules of places where the Company is listed; dealing with other matters conferred by the Board of Directors.

180 The Compensation and Remuneration Committee convened five meetings, reviewed 15 proposals and received one report in 2018. The attendance record is as follows:

Attendance/ Number of Members Meetings

Non-executive Directors Lu Zhiqiang 5/5 Wu Di 5/5

Executive Directors Zheng Wanchun 5/5 Liang Yutang 4/4

Independent Non-executive Directors Tian Suning (chairman of the committee since 29 June 2018) 3/3 Liu Jipeng 5/5 Li Hancheng 5/5 Xie Zhichun 4/5 Peng Xuefeng 5/5 Cheng Hoi-chuen (chairman of the committee before 29 June 2018) 2/2

Notes:

1. On 21 June 2018, Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his term of office of six years;

2. On 29 June 2018, the composition of the Compensation and Remuneration Committee was adjusted on the 10th meeting of the seventh session of the Board. Tian Suning, a Director, was elected as a member of the Compensation and Remuneration Committee to fill the vacancy;

3. On 12 October 2018, the former Vice Chairman of the Company, Mr. Liang Yutang ceased to the member of Compensation and Remuneration Committee as he has reached the age of retirement;

4. The number of meetings attended by Tian Suning, Cheng Hoi-chuen and Liang Yutang was less than the number of meetings convened for the year.

181 2. Major achievements of the Compensation and Remuneration Committee in 2018

During the Reporting Period, according to the Terms of Reference of the Compensation and Remuneration Committee of the Board 《董事會薪酬與考( 核委員會工作細則》) and the annual work plan of the Board, the Compensation and Remuneration Committee focused on optimising and refining the remuneration and performance appraisal system of the Senior Management, gave full play to its functions and carried out all tasks in a proactive manner. Its major achievements of the year are as follows:

(1) Objective evaluation on performance of Directors for the year

In order to enhance the efficiency of Directors performing their duties and the decision-making of the Board, the Compensation and Remuneration Committee of the Board carried out an objective evaluation of the performance of all the Directors for 2017 based on measurable key performance indicators during the Reporting Period and published the Appraisal Report of Performance of Directors of the Board of China Minsheng Bank for 2017 《中國民生銀行董事會( 2017年度董事履職評價報告》).

(2) Appraisal on due diligence of Senior Management for the year

The Compensation and Remuneration Committee of the Board assessed the due diligence of the Senior Management of the Head Office for 2017 under the authorisation of the Board according to related rules. It facilitated a thorough understanding of the Board and the Compensation and Remuneration Committee to the performance of Senior Management and guided them to improve their performance.

(3) Review of annual remuneration of the Directors and the Senior Management of the Head Office

The Compensation and Remuneration Committee reviewed the 2017 remuneration report of Directors based on the annual performance of Directors in compliance with the provision of the Rules on Remuneration of Directors and Supervisors 《董事( 、監事薪酬制度》). According to the Administrative Rules on Remuneration of Senior Management 《( 高級管理人員薪酬管理制度》) and the Administrative Measures of Venture Fund for Senior Management 《高級管理人員( 風險基金管理辦法》), the Compensation and Remuneration Committee reviewed the 2017 remuneration report of Senior Management of the Head Office appointed by the Board.

182 (4) Determination of targets of key performance indicators (KPI) for Senior Management in 2018

In accordance with the Administrative Rules on Remuneration of Senior Management 《高級管理人員薪酬管理制度》( ), the performance remuneration of the Senior Management is pegged to their KPIs. With reference to the actual operation of the Company, the Compensation and Remuneration Committee of the Board considered KPIs, risk weights and benchmark of Senior Management during the Reporting Period, which provided a rational basis for performance appraisal of Senior Management.

(5) Amendments to the Administrative Measures on Venture Fund for Senior Management of China Minsheng Banking Corp., Ltd. 《中國民生銀行股份有限( 公司高管風險基金管理辦法》)

In accordance with the Regulatory Guideline of Stable Remuneration of Commercial Banks 《商業銀行穩健薪酬監管指引》( ), the Compensation and Remuneration Committee of the Board made amendments to the Administrative Measures on Venture Fund for Senior Management of China Minsheng Banking Corp., Ltd. 《中國民生銀行股份有限公司高管風險基金管理辦法》( ) with reference to the actual situation of the Company and submitted the same to the Board for consideration and approval. It continued to strengthen the management of the risks and responsibilities of Senior Management and further refined the long-term incentive and restraint system of Senior Management.

(6) Determination on the pay scale of Senior Management of the Head Office

As stipulated in the Terms of Reference of the Compensation and Remuneration Committee under the Board 《董事會薪酬與考核委員會工作細則》( ) and Administrative Rules on Remuneration of Senior Management 《高級管理人員( 薪酬管理制度》), the Compensation and Remuneration Committee of the Board considered and determined the pay scale of part of the Senior Management of the Company.

(IV) Risk Management Committee

1. Composition of the Risk Management Committee and meetings in 2018

On 1 January 2018, the Risk Management Committee of the seventh session of the Board had five members. The chairman was Xie Zhichun and the members were Liang Yutang, Wu Di, Yao Dafeng and Song Chunfeng.

On 4 July 2018, the former Director, Mr. Yao Dafeng, tendered his resignation as a Director and member of the related special committees of the Company in order to devote more time and attention to other business commitments. The composition of the Risk Management Committee of the seventh session of the Board was adjusted as follows: Xie Zhichun as the chairman and Liang Yutang, Wu Di and Song Chunfeng as the members.

183 On 12 October 2018, the former Vice Chairman of the Company, Liang Yutang, tendered his resignation as a Director and member of the related special committees of the Company as he has reached the age of retirement. The composition of the Risk Management Committee of the seventh session of the Board was adjusted as follows: Xie Zhichun as the chairman and Wu Di and Song Chunfeng as the members.

The main functions and duties of Risk Management Committee shall be as follows:

Conducting research on national macroeconomic and financial policies and analysing the domestic and overseas market changes to formulate risk management proposals for the Company and establish risk control indicator system for the Company; studying on policies, regulations and regulatory indicators issued by regulatory authorities to provide recommendations for effective implementation; conducting researches on the development strategies and risk management system of the Company to provide recommendations on the improvement of organisational structure, control procedures and risk solutions for risk management; reviewing risk monitoring indicators system and risk management information analysis report to monitor the implementation of necessary identification, measurement, supervision and control measures for various risks carried out by the management; reviewing early-warning and prevention as well as contingency plans for major risks on operation and management of the Company; organising risk assessment for material operation issues to formulate risk prevention measures and other duties delegated by the Board of Directors.

The Risk Management Committee convened nine meetings, reviewed 27 proposals and received six reports in 2018. The attendance record is as follows:

Attendance/ Number of Members Meetings

Non-executive Directors Wu Di 9/9 Yao Dafeng 5/5 Song Chunfeng 9/9

Executive Director Liang Yutang 6/6

Independent Non-executive Director Xie Zhichun (chairman of the committee) 9/9

Notes:

1. Mr. Yao Dafeng has ceased to be the Director of the Company since 4 July 2018;

2. Mr. Liang Yutang has ceased to be the Director of the Company since 12 October 2018;

3. The number of meetings attended by Mr. Yao Dafeng and Mr. Liang Yutang was less than the number of meetings convened for the year.

184 2. Major achievements of the Risk Management Committee in 2018

In 2018, under the leadership of the Board, the Risk Management Committee continued to strengthen the relevance and effectiveness of risk control efforts of the Board. It refined risk control system of the Board and improved the overall quality of risk control system. Its major achievements of the year were as follows:

(1) Formulation and implementation of Administrative Measures on Risk Appetite of China Minsheng Bank 《中國民生銀行風險偏好管理辦法》( )

As part of its major tasks for 2018, the Risk Management Committee formulated the Administrative Measures on Risk Appetite of China Minsheng Bank 《中國( 民生銀行風險偏好管理辦法》) in accordance with the regulatory requirements and with reference to the suggestions from various parties and researches of peers. Having been considered and approved by the Risk Management Committee and the Board, the Administrative Measures on Risk Appetite of China Minsheng Bank 《中國民生銀行風險偏好管理辦法》( ) constitutes the overall framework of risk appetite management and sets up a solid foundation for the Board to strike a balance between strategic development and risk control and grasp the overall risk framework.

(2) Introduction of Core Values of Risk Management of China Minsheng Bank 《中( 國民生銀行風險經營核心理念》)

According to the plan of the Board and subject to the regulatory requirements and the actual needs of the Bank, the Risk Management Committee formulated the Core Values of Risk Management of China Minsheng Bank 《中國民生銀( 行風險經營核心理念》) with reference to the suggestions from various parties and the recommendations from the staff. Based on over 20 years of experience of the Bank and having been considered and approved by the Risk Management Committee and the Board, the Core Values of Risk Management of China Minsheng Bank 《中國民生銀行風險經營核心理念》( ) further facilitated the core of the establishment of the risk management culture and served as the important guiding principles of risk control for the Board, the management and business units at all levels.

(3) Improvement on risk management performance mechanism of the Board

Efforts were made to fulfill duties including guidance and supervision by the Board on the risk management. Taking into account the strategic transformation and the implementation of the three-year development plan, the Risk Management Committee completed the Guiding Opinion on Risk Management by the Board for 2018 (2018年董事會風險管理指導意見), Report on Risk Assessment for 2017 (2017年度風險評估報告), Interim Report on Risk Assessment for 2018 (2018 半年度風險評估報告), special risk investigation and various risk reports on the operation management. Coupled with stronger coordination of these initiatives, the Board had an integrated mechanism of guidance, implementation and evaluation of risk management.

185 (4) Review and regulation of major risk systems

In accordance with the Regulations on the Review of Major Risk Management Systems of the Board of China Minsheng Bank 《民生銀行董事會關於重要風( 險制度的審查規則》, the Risk Management Committee further defined a couple of mechanisms in relation to the scope of review, delivery, procedure and the division of work. It regulated the review procedures of major risk management systems and strengthened the performance efficiency and quality of the Board on risk management. The Risk Management Committee reviewed and considered a total of 10 risk management systems during the Reporting Period, including the Administrative Measures on Financial Asset Impairment of China Minsheng Bank 《民生銀行金融資產減值管理辦法》( ), Administrative Measures on Interest Rate Risk of Accounts of China Minsheng Bank (2018 Revised) 《民生( 銀行帳簿利率風險管理辦法(2018年修訂)》) and Regulations on Compliance Management of China Minsheng Bank 《民生銀行合規管理規定》( ).

(5) Fulfillment of duties of the Risk Management Committee in promoting all-round risk management

The Risk Management Committee performed its duties strictly according to the regulatory rules. During the Reporting Period, it held nine committee meetings, considered and approved 15 risk reports, including the Report on IT Risk for 2017 of China Minsheng Bank 《民生銀行( 2017年度信息科技風險管理報告》) and Annual Conclusion of Case Prevention for 2017 and Self-evaluation Report of China Minsheng Bank 《民生銀行( 2017年度案防工作年度總結及自我評估報告》). It also received and carried out discussion about various special reports concerning improvements on the duty performance and strategic transformation on risk management. It conducted researches and received reports on the risk management of the management and considered and approved reports on risk management on a quarterly basis.

(V) Audit Committee

1. Composition of the Audit Committee and meetings in 2018

On 1 January 2018, the Audit Committee of the seventh session of the Board had five members. The chairman was Liu Ningyu and the members were Tian Zhiping, Weng Zhenjie, Cheng Hoi-chuen and Peng Xuefeng.

On 29 June 2018, the composition of the Audit Committee was adjusted on the 10th meeting of the seventh session of the Board. The Audit Committee of the seventh session of the Board after the adjustment had five members. The chairman was Liu Ningyu and the members were Tian Zhiping, Weng Zhenjie, Peng Xuefeng and Tian Suning.

186 On 3 July 2018, Mr. Tian Zhiping tendered his resignation as a Director and member of the related special committees of the Board. As of the end of the Reporting Period, the Audit Committee of the Board had four members. The chairman was Liu Ningyu and the members were Weng Zhenjie, Peng Xuefeng and Tian Suning.

The Audit Committee of the seventh session of the Board consisted of three Independent Non-executive Directors and one Non-executive Director. The three Independent Non-executive Directors were experts in finance and management. One Non-executive Director was the key person in charge of renowned companies in China and had extensive experience in management and sufficient knowledge in finance and accounting. The Audit Committee is well-structured, with sufficient specialty and independence, which ensures the committee to perform its supervisory duty effectively.

The members of the Audit Committee and their profiles are set out in the section “Directors, Supervisors, Senior Management and Employees” in this report. The members of the committee are not related to each other in terms of finance, business, family or other material or relevant relations.

The main functions and duties of Audit Committee shall be as follows:

Making recommendations on the appointment or replacement of external auditor and reviewing the remuneration and terms of engagement of external auditor as well as handling any questions of registration or dismissal of external auditor; reviewing and monitoring the independence and objectivity of external auditor and the effectiveness of the audit process; discussing with the external auditor about the nature and scope of audit and the reporting responsibility of auditing before the auditing works proceeded; formulating and implement policies regarding non-auditing services provided by external auditor; reviewing the financial and accounting policies and practice; examining the annual financial budgets and annual accounting reports of the Company; reviewing the quarterly, interim and annual financial reports to be disclosed by the Company and making recommendation on the truthfulness, completeness and accuracy of the information disclosed in such financial reports. The committee shall pay special attention to the following matters: coordinating the internal and external auditing; reviewing reports on the write-off of bad debts during the Reporting Period; reviewing the auditing rules, medium- to long-term auditing plan and annual working plan for internal auditing; providing guidance for internal auditing; supervising the internal auditing department and supervising the implementation of the internal audit system to ensure sufficient resources are provided to and appropriate standing for the internal auditing department; evaluating the performance of the internal auditing department and the key officers; supervising the management to rectify problems identified during the internal audit, reviewing the accounting records, financial accounts or proposals for the internal control management and proposals for the auditing on material matters provided to the management by the external auditing firm; assisting the management to provide corresponding responses and ensuring that the Board of Directors provides timely responses to the recommendations made by the external auditing firm to the management; supervising the establishment of the internal control system and organising the self-evaluation of the internal control of the Bank;

187 discussing the internal control system with the management to ensure the management has performed their duties to establish an effective internal control system, including the adequacy of resources, qualification and experience of accountants and financial reporting personnel and training programs for relevant employees and relevant budget; reviewing arrangements by which employees of the Bank may, in confidence, raise concerns about possible improprieties in financial reporting, internal control or other matters; ensuring that proper arrangements are in place for a fair and independent investigation of such matters and for appropriate follow-up actions; monitoring the relationships between the Company and the external auditors in its capacity as a major representative; performing duties stipulated by the laws, regulations and listing rules of places where the Company is listed; and dealing with other matters conferred by the Board of Directors or related to the duties of the committee.

The Audit Committee convened nine meetings, reviewed 48 proposals and received three reports in 2018. The attendance record is as follows:

Attendance/ Number of Members Meetings

Non-executive Directors Tian Zhiping 5/5 Weng Zhenjie 9/9

Independent Non-executive Directors Liu Ningyu (chairman of the committee during the Reporting Period) 9/9 Cheng Hoi-chuen 4/4 Peng Xuefeng 9/9 Tian Suning 2/3

Notes:

1. On 15 June 2018, Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to expiry of his term of office of six years;

2. According to relevant resolution approved on the 10th meeting of the seventh session of the Board held on 29 June 2018, Mr. Tian Suning was elected as a member of the Audit Committee under the seventh session of the Board to fill the vacancy;

3. On 3 July 2018, Mr. Tian Zhiping tendered his resignation as a Director of the Company and member of the related special committees;

4. The number of meetings attended by Cheng Hoi-chuen, Tian Suning and Tian Zhiping was less than the number of meetings convened for the year.

188 2. Major achievements of the Audit Committee in 2018

During the Reporting Period, under the guidance of the Board, the Audit Committee performed its responsibilities and duties diligently by strengthening its supervision on financial report audit, optimising the internal control system and improving information quality of financial report. Major work accomplished during the year are as follows:

(1) Improvement in the vertical management of internal audit and the construction of internal control

In response to the changes in the economic and regulatory environment, the Audit Committee continued to strengthen the internal control system of the Company to enhance its internal control. On one hand, through approving the internal control work plan, reviewing the internal audit reports and attending the internal audit reporting meetings, the committee focused on carrying out key internal audit targets including strategic auditing, overall risk management auditing, compliance and performance auditing and the auditing of the consolidated financial statements of the Group. It enhanced the auditing and supervision of operation management, policy implementation, resources allocation, internal control and economic accountability of the management. On the other hand, continuous efforts were made to step up rectification and accountability of internal audit in order to improve the effectiveness of internal control mechanism, ensure the effective implementation of strategic policies and enhance the overall internal control of the Bank.

(2) Internal control inspections of and work guidance for branches

During the year, the Audit Committee investigated the internal control risks of the Kunming Branch and Dalian Branch and Minsheng Financial Leasing and profoundly understood the basic situation of operation management, the construction of internal control system as well as administrative measures on internal control of branches and subsidiaries. The Audit Committee put forward concrete requirements in respect of internal control management and risk management of branches and subsidiaries, and provided guidance on their work plan and layout of major works.

(3) Review of financial statements of the Company

Based on the disclosure requirements of the regulatory authorities for annual financial statements and the review and disclosure plan of the Audit Committee, the Audit Committee organised the preparation and auditing of the 2017 Annual Report, and completed the review of the 2017 Report on Final Accounts, 2018 Financial Budget, 2018 Interim Financial Report, and the first and third quarterly reports of 2018 of the Company.

189 (4) Organisation and completion of internal control evaluation

During the Reporting Period, in accordance with the Basic Standard for Corporate Internal Control 《企業內部控制基本規範》( ) and the supporting guidance, Guidelines for Internal Control of Commercial Banks 《商業銀行內部控制評( 價指引》) and other requirements in relation to the internal control evaluation of listed companies, the Audit Committee monitored and guided the Company to comprehensively evaluate the design and operation of internal control for 2017 under the principle of comprehensiveness, significance and objectiveness. The Audit Committee enhanced the evaluation on the operating results and features of business units and the strategic enforcement of the Board, so as to comprehensively enhance the overall effectiveness of its internal control evaluation.

(5) Completion of appraisal and re-appointment of external auditors

In accordance with the Articles of Association, Terms of Reference of Audit Committee 《審計委員會工作細則》( ), Administrative Measures on Appointment of Accounting Firm 《會計師事務所聘任管理辦法》( ) and requirements of regulatory authorities, the Audit Committee completed the appraisal regarding the auditing work of external accounting firms for 2017. According to the appraisal results, the Company confirmed the re-appointment of KPMG Huazhen LLP and KPMG Certified Public Accountants as the accounting firms for the external auditing of the Company for 2018. The Audit Committee also completed the consideration and discussion on the remuneration of the external accounting firms.

(6) Engagement of the 2019 audit accounting firm through public tender

To ensure the objectivity and independence of external auditing of the Company and continuity of annual auditing, the Audit Committee of the Board commenced the public tender for the engagement of the 2019 audit accounting firms in accordance with the relevant requirements of the Articles of Association and the Administrative Measures of Engagement of Accounting Firm. An accounting firm engagement team was established to review tendering proposals and consultative documents and assess the accounting firms that participated in the public tender. The relevant proposal has been passed by the Audit Committee of the Board and the Board of Directors.

190 (VI) Related Party Transactions Supervision Committee

1. Composition of the Related Party Transactions Supervision Committee and meetings in 2018

On 1 January 2018, the Related Party Transactions Supervision Committee of the seventh session of the Board consisted of five members. The chairman of the committee was Li Hancheng, and the members were Liang Yutang, Song Chunfeng, Liu Jipeng and Liu Ningyu. On 12 October 2018, Mr. Liang Yutang, the former Vice Chairman of the Board, who tendered his resignation as a Vice Chairman of the Board, Executive Director of the Company and member of the related special committees because he has reached the age of retirement. As at the end of the Reporting Period, the number of members of the Related Party Transactions Supervision Committee of the seventh session of the Board was four, with Li Hancheng as the chairman and Song Chunfeng, Liu Jipeng and Liu Ningyu as members.

The Related Party Transactions Supervision Committee of the seventh session of the Board had three Independent Non-executive Directors and are experts in auditing, finance, laws and management respectively. One Non-executive Director is a key person in charge of renowned companies in China and has extensive experience in management and sufficient knowledge in finance and accounting. The composition of the Related Party Transactions Supervision Committee of the Company is well-structured, with sufficient specialty and independence, which ensures that the Related Party Transactions Supervision Committee performs its supervisory duties effectively.

The members of the Related Party Transactions Supervision Committee and their profiles are set out in the section “Directors, Supervisors, Senior Management and Employees” in this report. The members of the committee are not related to each other in terms of finance, business, family or other material relations or relevant relations.

Major duties of the Related Party Transaction Supervision Committee shall be as follows:

Managing related party transactions and formulating corresponding management system for related party transactions, which shall be implemented upon approval by the Shareholders’ general meeting or the Board of Directors, in accordance with laws, administrative regulations, regulatory requirements of relevant regulatory authorities and stock exchanges, national uniform accounting system and international accounting standards, and the Articles of Association; reviewing and identifying related parties, reporting to the Board of Directors and the Board of Supervisors, and promptly announcing to the management of the Company in accordance with laws, administrative regulations, regulatory requirements of relevant regulatory authorities and stock exchanges, national uniform accounting system and international accounting standards, and the Articles of Association; defining the types of related party transactions and determining corresponding approval procedures and standards in accordance with laws, administrative regulations, regulatory requirements of relevant regulatory authorities and stock exchanges, national uniform accounting system and international accounting standards, and the Articles of Association; reviewing and approving related party transactions which shall be approved by the committee

191 in accordance with the review procedures and standards; reviewing and approving related party transactions which shall be approved by the Board of Directors or the Shareholders’ general meeting in accordance with the review and approval procedures and standards; examining the information disclosure of related party transactions; and performing other duties required by laws and administrative regulations of the places where the Company is listed, regulatory requirements of relevant regulatory authorities and stock exchanges, national uniform accounting system and international accounting standards, and the Articles of Association.

The Related Party Transactions Supervision Committee under the Board convened eight meetings, reviewed 31 proposals and received two reports in 2018. The attendance record is as follows:

Attendance/ Number of Members Meetings

Non-executive Director Song Chunfeng 8/8

Executive Director Liang Yutang 5/5

Independent Non-executive Directors Li Hancheng (chairman of the committee during the Reporting Period) 8/8 Liu Jipeng 8/8 Liu Ningyu 8/8

Note: On 12 October 2018, Mr. Liang Yutang, the former Vice Chairman of the Board, who tendered his resignation as a Vice Chairman of the Board, Executive Director of the Company and member of the related special committees of the Board because he has reached the age of retirement. Therefore, the number of meetings attended by Liang Yutang was less than the number of meetings in the year.

2. Major achievements of the Related Party Transactions Supervision Committee in 2018

During the Reporting Period, under the guidance of the Board, the Related Party Transactions Supervision Committee has performed its responsibilities and duties diligently in terms of management of related parties, examination, approval and control of related party transactions, information disclosure of related party transactions, system establishment of related party transactions and improvements on procedures of related party transactions. Major work accomplished during the year are as follows:

(1) Amendments to the Administrative Measures on Related Party Transactions 《關聯交易管理辦法》( ) of the Company

During the Reporting Period, the Related Party Transactions Supervision Committee under the Board substantially amended the Administrative Measures on Related Party Transactions 《關聯交易管理辦法》( ) of the Company with respect to recognition standards for related parties, approval authority and management procedures in accordance with the listing rules newly revised by

192 the SSE and the SEHK and in consideration of the restructuring and the actual situation of the management of related party transactions in recent years. The Administrative Measures on Related Party Transactions 《關聯交易管理辦法》( ) has been considered and approved by the Related Party Transactions Supervision Committee under the Board and the Board at a shareholders’ general meeting and has been duly enforced. The amendments to the Administrative Measures on Related Party Transactions 《關聯交易管理辦法》( ) were made in strict compliance with the regulatory requirements and optimised the related party transaction management procedures of the Company, ensuring compliance of related party transactions.

(2) Re-organisation of list of related parties

According to the requirements of the CBIRC, the listing rules of the SSE, the Hong Kong Listing Rules and relevant requirements of accounting standards, the database of related parties was maintained through regularly collecting update of data from related parties by mail, and was managed dynamically with prompt update, and effectively delivered the importance and management principles of related party transactions and internal transactions to the shareholders, Directors, Supervisors, Senior Management and subsidiaries of the Company. As such, a solid foundation was laid to enhance the management of related party transactions of the Company.

(3) Recognition and approval of related party transactions

During the Reporting Period, the Related Party Transactions Supervision Committee completed the filing, approval and disclosure of several related party transaction confirmations, related party credit granting and non-credit related party transactions. During the Reporting Period, the Related Party Transactions Supervision Committee put forward the integrated credit granting for groups. It examined the integrated credit granting for related party groups, including substantial shareholders, on a case-by-case basis, and submitted integrated credit granting exceeding its granting limit to the Board for approval, so as to enhance the efficiency of the management of related party transactions of the Company and to better control the risks.

(4) Effective management of internal transactions of the Group

During the Reporting Period, the management of internal transactions remained in line with the Administrative Measures on Internal Transactions 《內部交( 易管理辦法》) with continuous standardisation of supervision, review, report, control and evaluation of internal transactions. During the Reporting Period, for the non-credit internal transactions between subsidiaries and the Company and between subsidiaries, the Company continued to adopt the management mechanism based on budget management and transaction amount control, leading to effective management of internal transactions.

193 VII. Board of Supervisors

The Board of Supervisors is the supervisory organisation of the Company, which executes its powers and functions in accordance with the laws and regulations, such as the Company Law of the PRC, applicable regulatory provisions and the Articles of Association to promote the compliance of operations and stable development of the Company and safeguard interests of the Company and investors. The Board of Supervisors shall be accountable for the general meetings.

(I) Composition of the Board of Supervisors

On 20 February 2017, the change of session of the Board of Supervisors of the Company was completed. After elections by the general meeting of the Company and meeting of the representatives of employees, the seventh session of the Board of Supervisors of the Company comprised nine members, including three Shareholder Supervisors, three External Supervisors and three Employee Supervisors. The three External Supervisors are all experts in finance and management; the three Shareholder Supervisors have extensive management experience and sufficient knowledge in finance and accounting; and three Employee Supervisors have been engaged in policy analysis and banking operation and management for a long time, possessing extensive professional experiences. Mr. Cheng Guoqi resigned as Supervisor and member of the related special committee under the Board of Supervisors on 3 July 2018.

The Board of Supervisors is well-structured, with high degree of specialty and independence, which ensures that the Board of Supervisors brings its supervisory functions into full play.

The list of Supervisors and their profiles are set out in the section “Directors, Supervisors, Senior Management and Employees” of this report. The members of the Board of Supervisors are not related to each other in terms of finance, business, family or other material or relevant relations.

(II) Functions and duties of the Board of Supervisors

According to the Articles of Association, the Board of Supervisors of the Company shall exercise the following rights:

1. to review the regular reports of the Company prepared by the Board and propose opinions on the reports in writing;

2. to examine financial activities of the Company and may (if necessary) engage another accounting firm to conduct independent auditing on financial status in the name of the Company;

3. to oversee the compliance of Directors, President, Executive Vice Presidents, Chief Financial Officer and Board Secretary of the Company in performing their duties;

4. to demand any Directors, President, Executive Vice Presidents, Chief Financial Officer and Board Secretary of the Company to rectify his/her conduct when such conduct is detrimental to the interests of the Company, and to report such conduct to general

194 meetings or relevant national regulatory authorities if necessary; and to make proposals to remove any Director and/or member of Senior Management if they breach any applicable laws, administrative regulations, the Company’s Articles of Association or resolutions of general meetings;

5. to conduct auditing over the issues in connection with the operation and decision making, risk management and internal control of the Company as and when necessary;

6. to make a departure auditing, if required, in respect of any resigning director or member of Senior Management;

7. to issue opinions on the engagement of the accounting firm by the Company;

8. to propose to convene extraordinary general meetings, and, if the Board fails to convene or chair such a meeting as required under the Company Law of the PRC, to convene or chair the general meetings;

9. to propose to convene an extraordinary board meeting and submit proposals to the general meeting;

10. to file lawsuits against Directors and members of Senior Management according to Article 151 of the Company Law of the PRC;

11. to investigate any irregularities in the operations of the Company and, if necessary, may engage accounting firms, law firms or other professional firms to assist its work at the costs of the Company; and

12. to exercise other rights prescribed by the Articles of Association or conferred by the general meeting.

Members of the Board of Supervisors may attend meetings of the Board as non-voting delegates and are entitled to voice their opinions at the meetings.

(III) Board of Supervisors meetings and contents of resolutions

During the Reporting Period, eight meetings have been held by the Board of Supervisors of the Company, including one non-decision making meeting. The Board of Supervisors reviewed and approved 23 proposals of the Company, including the Annual Report, Working Report of the Board of Supervisors, regular reports for 2018, profit distribution plans, Internal Control Evaluation Report, Performance Appraisal Report, Strategic Transformation Evaluation Report and Amendments to Measures on Supervision of Due Diligence at the above meetings. During the Reporting Period, the Board of Supervisors had no objection towards the supervised matters.

195 (IV) Attendance record of Supervisors of the Company at meetings of the Board of Supervisors in 2018

Attendance/ Number of Supervisors meetings

Zhang Juntong 8/8 Wang Jiazhi 8/8 Guo Dong 8/8 Wang Hang 8/8 Zhang Bo 8/8 Lu Zhongnan 8/8 Wang Yugui 8/8 Bao Jiming 8/8 Cheng Guoqi 3/3

Note: As Mr. Cheng Guoqi resigned as Supervisor and member of the related special committee under the Board of Supervisors on 3 July 2018, the number of meetings he attended was less than the number of meetings convened for the year.

(V) Attendance record of Supervisors of the Company at general meetings in 2018

The following table sets out the attendance of Supervisors of the Company at the general meetings in 2018:

Attendance/ Number of Supervisors meetings

Zhang Juntong 2/2 Wang Jiazhi 2/2 Guo Dong 2/2 Wang Hang 2/2 Zhang Bo 2/2 Lu Zhongnan 2/2 Wang Yugui 2/2 Bao Jiming 2/2 Cheng Guoqi 2/2

196 VIII. Special Committees under the Board of Supervisors

The Board of Supervisors of the Company has a Nomination and Examination Committee and a Supervisory Committee. Members, rights and functions of such committees and their works in 2018 are as follows:

(I) Nomination and Examination Committee

1. Composition of the Nomination and Examination Committee and meetings in 2018

On 1 January 2018, the number of members of the Nomination and Examination Committee of the seventh session of the Board of Supervisors was seven with Wang Yugui as the chairman and Zhang Juntong, Wang Hang, Zhang Bo, Lu Zhongnan, Bao Jiming and Cheng Guoqi as members. Mr. Cheng Guoqi resigned as Supervisor and member of the related special committee under the Board of Supervisors on 3 July 2018. As at the end of the Reporting Period, the number of members of the Nomination and Examination Committee of the seventh session of the Board of Supervisors was six with Wang Yugui as the chairman and Zhang Juntong, Wang Hang, Zhang Bo, Lu Zhongnan and Bao Jiming as members.

The major duties of the Nomination and Examination Committee under the Board of Supervisors include:

Making recommendations to the Board of Supervisors on the size and composition of the Board of Supervisors; reviewing standards and procedures for election of Supervisors and making recommendations to the Board of Supervisors; extensively identifying qualified candidates for Supervisors or accepting recommendations on candidates for Supervisors by other persons as authorised under the Articles of Association; carrying out preliminary examination on qualification and conditions of the candidates for Supervisors nominated by shareholders and making recommendations; supervising the selection and appointment processes of Directors; supervising and evaluating the performance of Directors, Supervisors and members of Senior Management during the year; studying and formulating remuneration policy, procedures and plans of Supervisors and submitting reports to the general meeting for approval after being considered and approved by the Board of Supervisors; ensuring the remuneration management system and policy of the Company and the remuneration plan of Senior Management are efficient and reasonable; conducting departure auditing in respect of Senior Management when necessary; formulating training plans and organising training activities for Supervisors; and performing other duties conferred by the Board of Supervisors.

197 In 2018, the Nomination and Examination Committee under the Board of Supervisors convened five meetings and reviewed 13 proposals. The attendance record of each member is as follows:

Attendance/ Number of Supervisors meetings

Wang Yugui (chairman of the committee during the Reporting Period) 5/5 Zhang Juntong 5/5 Wang Hang 5/5 Zhang Bo 5/5 Lu Zhongnan 5/5 Bao Jiming 5/5 Cheng Guoqi 3/3

During the Reporting Period, based on the work plan of the Board of Supervisors, the Nomination and Examination Committee under the seventh session of the Board of Supervisors actively performed its duties and functions conferred by the Articles of Association and the Terms of Reference of Nomination and Examination Committee under the Board of Supervisors 《監事會提名與評價委員會工作細則》( ). It carried out the performance appraisal, reviewed and approved the remuneration distribution plan for the Supervisors, conducted departure auditing of Senior Management and organised and arranged training programmes for Supervisors. All tasks in 2018 were successfully completed and the functions of the committee were performed in a relatively effective way.

2. The major achievements of the Nomination and Examination Committee under the Board of Supervisors in 2018

(1) Carrying out performance appraisal

During the Reporting Period, the Nomination and Examination Committee carried out performance appraisal in 2017. It reviewed and supervised the performance of Directors and members of Senior Management through different ways on a regular and on-going basis, including attending meetings of the Board as non- voting delegates and Senior Management, reviewing meeting minutes of the Board, reviewing and examining the meeting documents of the Board and the Senior Management and refining the performance supervision files of Directors. The Nomination and Examination Committee circulated a supervision report on the statistics and performance appraisal of Directors and Supervisors for the first half of the year to remind them to pay attention to their performance. It carried out the annual performance appraisal of the Board of Directors, Senior Management and its members and self-evaluation of the Board of Supervisors and

198 Supervisors based on the supervision information of performance during the year. It also formulated the Performance Appraisal Report on the Board of Directors and Directors in 2017 (Draft) 《( 2017年度董事會及董事履職評價報告(草案)》), the Performance Appraisal Report on the Board of Supervisors and its Members in 2017 (Draft) 《( 2017年度監事會及其成員履職評價報告(草案)》) and the Performance Appraisal Report on the Senior Management and its Members in 2017 (Draft) 《( 2017年度高級管理層及其成員履職評價報告(草案)》).

(2) Discussing and approving Supervisors’ remuneration distribution plan

In accordance with the Articles of Association, the duties of the Nomination and Examination Committee include discussing and formulating remuneration policy plans for Supervisors. During the Reporting Period, the Nomination and Examination Committee conducted review and examination of the remuneration distribution for Supervisors in 2017 based on researches and submitted the results to the Board of Supervisors for consideration, approval and disclosure along with the 2017 Annual Report.

(3) Conducting departure auditing of Senior Management

During the Reporting Period, departure auditing of Senior Management were conducted in accordance with the regulatory requirements and the relevant requirements of the Company. Based on thorough understanding of the duties during their office term of the personnel being audited, the committee prepared the departure auditing report by means of review, examination, careful consideration, analysis and interviews.

(4) Organising training programmes for Supervisors

During the Reporting Period, the Nomination and Examination Committee arranged Supervisors to participate in the training courses for directors and supervisors sponsored by the Beijing Branch of CSRC.

(II) Supervisory Committee

1. Composition of the Supervisory Committee and meetings in 2018

On 1 January 2018, the number of members of the Supervisory Committee of the seventh session of the Board of Supervisors was seven, with Zhang Juntong as the chairman and Wang Jiazhi, Guo Dong, Wang Hang, Lu Zhongnan, Wang Yugui and Mr. Cheng Guoqi as members. Mr. Cheng Guoqi resigned as Supervisor and member of the related special committee under the Board of Supervisors on 3 July 2018. As at the end of the Reporting Period, the number of members of the Supervisory Committee of the seventh session of the Board of Supervisors was six, with Zhang Juntong as the chairman and Wang Jiazhi, Guo Dong, Wang Hang, Lu Zhongnan and Wang Yugui as members.

199 The major duties of the Supervisory Committee under the Board of Supervisors include:

Formulating proposals on the examination and supervision on the financial activities of the Company; formulating proposals on the examination and supervision on the operation decisions, risk management and internal control of the Company; evaluating the compliance and implementation of significant decisions of the Company; organising visits, researches, and investigations on business units of the Company and supervising the rectification of relevant deficiencies; carrying out specific investigation on key projects as required by regulatory authorities and submitting investigation report in a timely manner; and performing other duties conferred by the Board of Supervisors.

In 2018, the Supervisory Committee under the Board of Supervisors convened 11 meetings, reviewed seven proposals and received 19 reports. The attendance record of each member is as follows:

Attendance/ Number of Supervisors meetings

Zhang Juntong (chairman of the committee during the Reporting Period) 11/11 Wang Jiazhi 11/11 Guo Dong 11/11 Wang Hang 11/11 Lu Zhongnan 11/11 Wang Yugui 11/11 Cheng Guoqi 5/5

During the Reporting Period, based on the work plan of the Board of Supervisors, the Supervisory Committee under the seventh session of the Board of Supervisors actively performed the duties and functions conferred by the Articles of Association and the Terms of Reference of Supervisory Committee under the Board of Supervisors 《監事會監督委員會工作細則》( ). The Supervisory Committee carried out supervision in a prudent manner, assisted the Board of Supervisors in completing major researches and enhanced supervision on key strategies, finance, risks and internal control. Through further optimising its supervision and response mechanism, the Supervisory Committee duly performed its duties.

200 2. Major achievements of Supervisory Committee under the Board of Supervisors in 2018

(1) Strengthening the supervision of implementation of important strategies

During the Reporting Period, the Supervisory Committee assisted the Board of Supervisors in carrying out an appraisal of the implementation of the Phoenix Project and the transformation in accordance with the regulatory requirements and the development of the Company. It also assisted in the implementation of specific supervision processes. First, through receiving special reports on the progress of reform and transformation, the committee actively follow up the progress of the implementation of reform and transformation projects and the problems identified. Recommendations and advice were made through the compilation of the Supervision Summary on the Strategic Transformation Reform of the Board of Supervisors 《監事會戰略轉型改革監督簡報》( ). Second, it visited a number of branches to supervise the implementation of the Phoenix Project and the reform and transformation. It also promoted the concept and implementation of reform and transformation. Specific comments or suggestions were made in respect of the actual problems arising from the reform of the branches. Third, through review of documents, interviews and on-site visits, the committee conducted the appraisal of the Phoenix Project in different stages in terms of its blueprint planning, organisation system, implementation mechanism and effects. It prepared the Strategic Transformation Evaluation Report on the Phoenix Plan of China Minsheng Bank 《中國民生銀行鳳凰計劃戰略轉( 型評估報告》), in which recommendations were made to the Board and the management.

(2) Reinforcing financial monitoring

During the Reporting Period, the Supervisory Committee continued to reinforce the supervision and investigation of key financial activities and key accounting and auditing issues of the Company, and the truthfulness and completeness of regular reports based on regulatory requirements and information disclosure requirements. Through receiving internal and external auditing reports regularly, attending relevant Board meetings as non-voting delegates and reviewing regular reports, the committee enhanced the supervision of the truthfulness, accuracy and completeness of the financial reports of the Company. The Company paid close attention to the changes in major operational data and indicators, and made comparative analysis on profitability, growth rate, asset quality, regulatory indicators, development and efficiency, and prepared quarterly, interim and annual analysis and supervision report of the operation and industry index of other banks and financial institutions and provided operational risk alerts to the management when necessary.

201 (3) Strengthening monitoring of risks

In accordance with the regulatory requirements and based on the actual situation of the Company, the committee further refined its supervision measures and focused on the supervision of general risk management, management of specific risks and material risks. First, it issued supervisory opinions on risks relating to credit, market, remote credit extension, liquidity and deposits, wealth management and asset management. A total of 11 supervisory notices were issued and follow- up measures were monitored to ensure effective prevention of risks. Second, it promoted risk management culture at a number of branches and urged the front-line business units to attach greater importance to risk management and strengthen risk prevention. Specific advice and suggestions in respect of problems identified through investigation were made to operation decision-makers.

(4) Emphasizing supervision of internal control and compliance management

The Supervisory Committee strengthened coordination between external and internal supervision and put great efforts in supervision and inspection of the internal control and compliance management in accordance with financial policies and regulatory requirements of the government. First, it received regular reports from departments in charge of internal auditing, internal control and compliance management on topics such as consolidated statements of the Group, emerging channel business, anti-money laundering, related party transactions and other works and made various management recommendations. Second, it conducted research and supervision on business development and compliance management by visiting the business units. 20 research reports of the Board of Supervisors were issued, which effectively improved internal control management of the Company. Third, it further increased legal compliance and internal control supervision of overseas and subsidiaries. It visited Hong Kong Branch of the Company, CMBC International and four rural banks to conduct research and completed relevant research reports. Suggestions were made to these institutions for improving corporate governance, optimising Group-oriented management and promoting the coordinated development between these institutions and the Company.

(5) Improving supervision over rectification

For the problems identified through regulatory inspections and internal and external audits, follow-up measures were monitored through receiving progress reports on the rectification work on a regular basis. Efforts were made to implement rectification measures and promote the concept of legal compliance. In view of the problems raised in supervisory notices and research reports, an archive was established to track implementation progress. A feedback and follow-up evaluation mechanism was also set up to ensure the effective implementation of the supervisory suggestions. At the same time, in order to fully capitalising on its supervisory function, the committee increased the use and application of supervision results so as to facilitate the decision-making for operation and management.

202 IX. Decision-making System of the Company

The highest authority of the Company is the general meeting, which manages and supervises the operations of the Company through the Board of Directors and the Board of Supervisors. The President is appointed by the Board of Directors and is fully responsible for the daily operations and management of the Company. The Company adopts a single-level legal person system. Branches are all non-independent accounting entities, operating under the authorisation of the Head Office and reporting to the Head Office.

The Company has no controlling shareholders and is completely independent from its major shareholders in terms of business, personnel, assets, organisations and finance. The Company maintains independence and integrity in managing its own businesses and operations, and its Board, the Board of Supervisors and internal departments also operate independently.

X. Establishment and Implementation of the Performance Evaluation and Incentive Mechanism for Senior Management

In accordance with the Administrative Rules on Remuneration of Senior Management 《高級管理人員薪酬管理制度》( ), the performance remuneration of the Senior Management is pegged to their KPIs and the results of their annual due diligence appraisal. With reference to the 2018 Financial Budget Report 《( 2018年度財務預算報告》), the Compensation and Remuneration Committee under the Board set the targets of the KPIs for 2018 and the Board determined the annual performance remuneration of Senior Management based on the KPI results, such as net profit and risk-adjusted return on capital, and the results of their due diligence appraisal. In accordance with the regulatory requirements, the Company has set up venture funds for Senior Management since 2009, which were accrued by a certain proportion from Senior Management’s performance remuneration on a yearly basis. The management system of the venture funds for Senior Management was further improved in 2018.

(I) Remuneration policy for Senior Management of the Company

The remuneration policy for Senior Management of the Company is implemented to facilitate the accomplishment of development strategies and business objectives, and at the same time reflects the principles of human resources management strategy and guidelines of the Company. The Company advocates a performance-based evaluation culture with an emphasis on value creation so as to encourage the Senior Management to press ahead along with the Company. The Company formulated a fair and coherent remuneration policy for Senior Management with reasonable structure and market competitiveness; set up incentive and restraint mechanism for Senior Management with simple and clear classification of duties and performance management system; and determined remuneration of Senior Management according to their duties, capability and contribution to operating results.

203 (II) Remuneration policy for Directors of the Company

The Company paid remuneration to all Directors in accordance with the Rules on Remuneration of Directors and Supervisors of China Minsheng Banking Corp., Ltd. 《( 中國民生銀行股份有限公司董事、監事薪酬制度》). The remuneration of Directors comprises annual fee, allowances for special committees, reimbursement for attending meetings and reimbursement for research and investigation.

XI. Information Disclosure and Investor Relations

(I) Information disclosure

The Company discloses its information in strict compliance with the regulations of the securities regulatory authorities, and publishes all sorts of regular reports and interim announcements in accordance with laws to ensure the timeliness, accuracy, truthfulness and integrity of its information disclosure and to ensure equal access to information for all shareholders. During the Reporting Period, the Company published four regular reports and 78 interim announcements on the SSE. The Company also published 148 information disclosure documents both in Chinese and English, including 65 overseas regulatory announcements on the SEHK. According to the Hong Kong Listing Rules, the Company has issued the Environmental, Social and Governance Report for 2017.

(II) Investor relations

In respect of investor relations management, the Company adhered to its strategic targets and put great emphasis on its market positioning. The Company regularly held results presentations and actively participated in large-scale investment strategy seminars, so as to show the latest results and potential of the Company to investors.

The website of the Company, investor hotlines, investor journals and investment strategy conference with securities companies served as effective and smooth communication channels between the Company and investors. During the Reporting Period, the Company had organised three performance conferences. The Company also organised investor briefing session regarding profit distribution for the second half of 2017 on the roadshow platform of SSE through internet interaction to respond to investors’ inquiries in relation to profit distribution plan for the second half of 2017. With proactive efforts to establish communication with domestic and overseas major institutional investors, the Company took part in six major institutional investment strategy seminars held by domestic and overseas investment banks or securities firms and received more than 70 research visits by investment institutions and 110 visits by investors, meeting a total of 420 persons. Through these communication channels, the Company promoted its operating results, development strategies and transformation to the capital market and achieved great recognition from domestic and overseas institutions.

204 To safeguard the rights and interests of minority shareholders, the Company published 12 special issues of The Investors. The Company also received 113 calls from investors and responded to their concerns regarding the fluctuations of stock price, dividend distribution, asset quality and other hot issues. The Company also answered approximately 95 questions from investors through E-interaction platform of SSE (“上證e互動”網絡平台) and the market response was encouraging.

During the Reporting Period, the Company received wide market recognition for its efforts in information disclosure and investor relations. The Company won a couple of awards, including the “Investor Relation Management Award (投資者關係管理獎)” in the Golden Bauhinia Awards by China Securities, “Hong Kong Investor Relations Award — Certificate of Excellence (香港投資者關係大獎—卓越獎)” by Hong Kong Investor Relations Association, “Hong Kong Stock Connect Companies with Excellent Investment Returns (港股通公司投資回報實力排行榜大獎)” in the Golden Wing Awards for 2018 by Securities Times as well as “Annual Report Golden Award (年報金獎)” and “Technical Achievement Award (技術成就獎)” in the 2017 Annual Report Selection by the League of American Communications Professionals (LACP).

XII. Amendments to Articles of Association in 2018

During the Reporting Period, the annual general meeting of the Company for 2017 considered and approved the Resolution on the Amendments to the Articles of Association of China Minsheng Banking Corp., Ltd. (關於修訂《中國民生銀行股份有限公司章程》的決議). The amendments mainly include amendments to other provisions based on regulatory rules and the actual situation of the Company. Please refer to the announcement dated 21 June 2018 and the circular dated 8 May 2018 in relation to the annual general meeting for 2017, the second A Share class meeting for 2018 and the second H Share class meeting for 2018 for details. The amended Articles of Association are still subject to approval by the CBIRC published on the website of the Company (www.cmbc.com.cn) and the HKEXnews website of the SEHK (www.hkexnews.hk).

XIII. Continuous Professional Development Training of Directors

During the Reporting Period, all Directors of the Company abided by their obligations and duties in the Company and kept abreast of the business operation and development of the Company. The Company encouraged its Directors to take part in various continuous professional development programs and the Directors have improved and enhanced their knowledge and expertise through the study of relevant publications. All Directors have participated in reform and transformation seminars organised by Company for several times and studied various research reports in relation to risks and business to understand the reform and transformation and operation management of the Company. All Directors have participated in the online trainings for directors of listed companies organised by the SEHK. The Directors, Wu Di, Li Hancheng, Liu Ningyu, Lu Zhiqiang, Liu Yonghao and Weng Zhenjie have participated in the finance or corporate governance trainings organised by professional institutions.

205 XIV. Training of Company Secretary

During the financial year ended 31 December 2018, Wong Wai Yee, Ella, the Company Secretary, has undertaken not less than 15 hours of relevant professional trainings organised by the SEHK and other professional institutions.

XV. Contact with Company Secretary

During the Reporting Period, Ms. Wong Wai Yee, Ella of Tricor Services Limited, an external service provider, has been engaged by the Company as its Company Secretary. Mr. Wang Honggang, the Representative of Securities Affairs of the Company, is the primary contact person of the Company.

XVI. Compliance with the Corporate Governance Code Set Out in Appendix 14 to the Hong Kong Listing Rules

During the Reporting Period, the Company has fully complied with the code provisions of the Corporate Governance Code set out in Appendix 14 to the Hong Kong Listing Rules and most of the recommended best practices contained therein.

XVII. Internal Control

The Company has set up a comprehensive corporate governance structure with clear division of responsibilities among the Board, the Board of Supervisors and the management and maintained an effective internal control management system. In compliance the Law on Commercial Banks of the PRC 《中華人民共和國商業銀行法》( ), Guidelines for Internal Control of Commercial Banks 《商業銀行內部控制指引》( ), the Basic Standard for Corporate Internal Control 《企業內部控制基本規範》( ) and other laws and regulations and regulatory rules, the Company established and effectively implemented comprehensive internal control policies and evaluated their effectiveness.

The Board has entrusted the Audit Department of the Company to evaluate the effectiveness of internal control. The Audit Department conducts preliminary identification of internal control deficiencies in accordance with the deficiency identification standards, and gives rectification requirements to the evaluated departments and carries out follow-up measures on the rectification. In respect of major deficiencies in internal control, the Audit Department communicates and confirms with the Senior Management of the Company, and suggests improvement measures. For major issues identified in the audit and the decisions of the Senior Management on whether rectification measures should be taken, the Audit Department reports to the Audit Committee which shall make the final decision on major control deficiencies and hold the relevant units or persons responsible.

The Board has entrusted the Audit Department of the Company to evaluate the effectiveness of the internal control of the Company as of 31 December 2018, being the benchmark date of self-evaluation report on internal control, based on both daily and specialised supervision of internal control. The Audit Department issued the Self-evaluation Report of Internal Control for 2018 of China Minsheng Bank 《中國民生銀行( 2018年度內部控制評價報告》), according to which, no material defects were found in the internal control on financial and non-financial reports. For details of the Self-evaluation Report of Internal Control for 2018 of China Minsheng Bank, please visit the Company’s website (www.cmbc.com.cn) and the website of the SSE (www.sse.com.cn).

206 KPMG Huazhen LLP engaged by the Company has conducted review and issued the Auditor’s Report on Internal Control of China Minsheng Bank for 2018 《中國民生銀行( 2018年度內部控制審計報告》) which confirmed that the Company maintained effective internal control of financial report in all material aspects as of 31 December 2018 in accordance with the relevant regulations, and no material defect was identified in all material aspects of internal control on non-financial items. For details of the Auditor’s Report on Internal Control of China Minsheng Bank for 2018, please visit the Company’s website (www.cmbc.com.cn) and the website of the SSE (www.sse.com.cn).

XVIII. Risk Management

Based on the regulatory requirements and due diligence of risk management requirements, and in line with its development strategy and three-year plan, the Company steadily pressed ahead risk management through enhancing coordination and synergy between different business segments, which further improved the relevance and effectiveness of the risk management performance of the Board.

Firstly, in response to major risk management issues of the Company during its strategic transformation and business development, the Board formulated and issued the Guidelines on Risk Management of the Board of Directors of China Minsheng Bank in 2018 《中國民生銀( 行董事會2018年風險管理指導意見》) at the beginning of 2018. Annual targets and overall requirements for risk management of the management were proposed, which mainly includes: principles of risk management, qualitative objectives and quantitative indicators of risk management, risk management strategies, focuses of risk management and implementation requirements, covering every aspect of comprehensive risk management. Catering to the requirements of strategic transformation and three-year plan, it places an emphasis on the timely introduction of the management system of risk appetite and the core concept of risk management. The management is required to formulate implementation strategies and plans based on the risk management objectives of the Board and coordinate the communication and implementation. The Risk Management Committee of the Board is responsible for guiding and supervising the implementation and cooperating with risk investigation, risk assessment and special inspections of the Board in a bid to achieve the risk management objectives for the year of 2018.

Secondly, the Board formulated and implemented the Administrative Measures on Risk Appetite of China Minsheng Bank 《中國民生銀行風險偏好管理辦法》( ) and established a comprehensive management framework of risk appetite, which serves as the basis of the standardised management of risk appetite of the Company. The management of risk appetite is an important part of comprehensive risk management. It helps the Board to maintain the balance between strategic development and risk control and it also regulates the operation and management of the Bank. As the top-level design for risk appetite management of the Company, the Administrative Measures is based on risk-adjusted return on capital (RAROC), which ensures that the risk management mechanisms can maintain the balance between business development and risk control. Having fully considered the risk profile of every operation management aspect, the Administrative Measures has laid an important foundation for the management system of risk appetite that complies with the strategic development of the Bank.

207 Thirdly, the Board formulated the Core Values of Risk Management of China Minsheng Bank 《中國民生銀行風險經營核心理念》( ) (the “Core Values”) which further facilitated the establishment of the risk management culture of the Company and served as the guiding principles. The Core Values determined and standardised the core principles of the risk management culture of the Company. As the important guiding principles of the operation and management and risk management of the Company, the Core Values were integrated into the whole process of risk management of the Board, the management and the business units so as to facilitate the coordination of operational plans, capital plans, financial plans, performance evaluation and risk management policies. Based on the Core Values, the Board improved the comprehensive risk management system and supported the management to incorporate the values into the daily operation management. As such, the employees can perform their duties accordingly and promote the stable operation and sustainable development of the Company.

Fourthly, based on the strategic transformation and the three-year plan of the Company, the Risk Management Committee of the Board commissioned independent third parties to assess risks related to the strategy of becoming a bank for the NSOEs in order to have a good grasp of the risks arising from the strategic transformation. Through further focusing on the assessment of material and major risks, the Board was able to better coordinate the overall operation and development and enhance synergy according to its risk management measures. As a result, the Board performed its risk management obligations more effectively in line with the strategic transformation and the three-year plan of the Company. Meanwhile, the Risk Management Committee under the Board also conducted specific research on risks and brought forward proposals on the improvement of risk management, providing a significant basis for risk management decision making of the Board.

Fifthly, in accordance with its information disclosure management system, the Company has adopted control measures to monitor its business and corporate development and events, including insider registration and management pursuant to the Rules for Insider Registration and Management (《內幕信息知情人登記管理規定》) formulated by the Company. All departments, branches (sub-branches), subsidiaries of the Company shall submit written reports to the Office of the Board of the Company before disclosure of inside information. They shall also submit and supplement the information of insiders and report to the regulatory authorities in accordance with relevant regulations. Internal investigation shall be conducted on trading of shares and derivatives of the Company by insiders. In case of discovery of any insider transaction, inside information leakage or suggestion to other parties to use inside information for transaction, relevant parties shall be held accountable, and the relevant situation and results shall be timely reported to regulatory authorities. If any inside information of the Company is circulated in the market before being disclosed in accordance with laws resulting in abnormal change in the share price of the Company, the Board Secretary of the Company shall promptly report to the Board so that the Company can timely clarify and report to regulatory authorities.

The Board is committed to establishing effective risk management and internal control systems and has the ultimate responsibilities for the risk management, internal control and compliance management of the Company. It is the obligation of the Board to review the effectiveness of such systems. Given the objectives of the risk management and internal control systems are to manage rather than eliminate the risks that prevent the achievement of business targets, the Board can only reasonably and not absolutely ensure that the risk management and internal control systems may prevent major misstatement or loss.

208 Chapter 7 Report of the Board of Directors

I. Performance of Principal Business, Financial Results and Business Development

For details of the principal business, key indicators and analysis of financial results and business development of the Company, please refer to “Chapter 2 Summary of Accounting Data and Financial Indicators” and “Chapter 3 Discussion and Analysis on Business Operation” in this report.

II. Environmental Policy and Performance of the Company

The Company has published the “2018 Environmental, Social and Governance Report” in accordance with rule 13.91 of the Hong Kong Listing Rules and the Environmental, Social and Governance Reporting Guide contained in Appendix 27 to the Hong Kong Listing Rules. Please refer to the website of the SSE, the HKEXnews website of the SEHK and the website of the Company.

III. Compliance of Relevant Laws and Regulations

The Board is of the view that during the Reporting Period, the Company legally operated its business and its decision-making procedure was in compliance with relevant laws, regulations and the Articles of Association. The Company is not aware of any breach of laws and regulations and the Articles of Association of the Company or any act which would prejudice the interests of the Company and its shareholders by any existing Directors, Supervisors or Senior Management when performing their duties during the Reporting Period.

IV. Subsequent Events

Save as disclosed above, from the end of the financial year to the date of this report, the Company had no material events.

V. Profit Distribution Plan

According to the financial statements of the Company for 2018, net profit of the Company was RMB49,973 million and dividend of preference shares of RMB551 million was paid. 10% of the net profit of the Company for 2018, being RMB4,997 million, was allocated to the statutory surplus reserve. As the general provision for risks has complied with the rate of 1.5% of the balance of the risky assets as at the end of 2018, no further general provision for risks was made. The profits distributable to ordinary share holders as at the end of December 2018 was RMB187,895 million.

According to the Articles of Association of the Company in respect of profit distribution, having considered various factors including the capital adequacy ratio required by the regulatory authorities and the sustainable development of business of the Company, the Company proposed to distribute to holders of A shares and H shares whose names appear on the registers as at the record dates a cash dividend of RMB3.45 (tax inclusive) for every 10 shares being held. Based on the number of shares of the Company in issue, being 43,782 million shares, as at the end of 2018, the total cash dividend was approximately RMB15,105 million. 209 The actual amount of total cash dividend to be paid will be subject to the total number of shares recorded on the registers as at the record dates. The cash dividend will be denominated and declared in RMB, and will be paid in RMB to holders of A shares and in Hong Kong dollar to holders of H shares. The actual amount of dividend to be paid in Hong Kong dollar shall be calculated based on the benchmark exchange rate of RMB against Hong Kong dollar as quoted by the PBOC on the day of the general meeting.

The cash dividend is expected to be paid to holders of H shares on 26 July 2019.

The Independent Non-executive Directors of the Company are of the view that the profit distribution proposal for 2018 of the Company is in line with the actual condition of the Company, in the interests of the Company and its shareholders and in compliance with the relevant laws, regulations and the Articles of Association, and is favourable to the sustainable, stable and sound development of the Company.

The formulation and implementation of the cash dividend policy by the Company are in compliance with the stipulations of the Articles of Association and the requirements stated in the resolutions approved by the general meeting of the Company. The basis and proportion of profit distribution are clearly specified. Effective determination and approval procedures and mechanisms are in place. The said distribution has been examined and approved by the Independent Non-executive Directors. Legitimate rights and interests of minority shareholders are well protected by being entitled to attend general meetings to exercise their voting rights and make proposals or enquiries on the operations of the Company.

Taxation

According to the Enterprise Income Tax Law of the PRC 《中華人民共和國企業所得( 稅法》) and its implementation regulations (the “EIT Law”), the tax rate of the enterprise income tax applicable to the income of a non-resident enterprise deriving from the PRC is 10%. For this purpose, any H shares registered under the name of non-individual enterprise, including the H shares registered under the name of HKSCC Nominees Limited, other nominees or trustees, or other organisations or entities, shall be deemed as shares held by non- resident enterprise shareholders (as defined under the EIT Law). The Company will distribute the dividend to those non-resident enterprise shareholders subject to a deduction of 10% enterprise income tax withheld and paid by the Company on their behalf.

Any resident enterprise (as defined under the EIT Law) which has been legally incorporated in the PRC or which was established pursuant to the laws of foreign countries (regions) but has established effective administrative entities in the PRC, and whose name appears on the Company’s H share register should deliver a legal opinion ascertaining its status as a resident enterprise furnished by a qualified PRC lawyer (with the official chop of the law firm issuing the opinion affixed thereon) and relevant documents to Company’s H share register, Computershare Hong Kong Investor Services Limited, in due course, if they do not wish to have the 10% enterprise income tax withheld and paid on their behalf by the Company.

210 Pursuant to the Notice on the Issues on Levy of Individual Income Tax after the Abolishment of Guoshuifa (1993) No. 045 Document 《關於國稅發( (1993)045號文件廢止後有關個人所得稅徵管問題的通知》) (the “Notice”) issued by the State Administration of Taxation on 28 June 2011, the dividend to be distributed by the PRC non-foreign invested enterprise which has issued shares in Hong Kong to the overseas resident individual shareholders, is subject to the individual income tax with a tax rate of 10% in general.

However, the tax rates for respective overseas resident individual shareholders may vary depending on the relevant tax agreements between the countries of their residence and Mainland China. Thus, 10% individual income tax will be withheld from the dividend payable to any individual shareholders of H shares whose names appear on the H share register of members of the Company on the record date, unless otherwise stated in the relevant taxation regulations, tax treaties or the Notice.

Profit Distribution to Investors of Northbound Trading

For investors of the SEHK (including enterprises and individuals) investing in the A shares of the Company listed on the SSE (the “Northbound Trading”), their dividends will be distributed in RMB by the Company through the Shanghai Branch of China Securities Depository and Clearing Corporation Limited to the account of the nominee holding such shares. The Company will withhold and pay income taxes at the rate of 10% on behalf of those investors and will report to the tax authorities for the withholding. For investors of Northbound Trading who are tax residents of other countries and whose country of domicile is a country which has entered into a tax treaty with the PRC stipulating a dividend tax rate of lower than 10%, those enterprises and individuals may, or may entrust a withholding agent to, apply to the competent tax authorities for the entitlement of the rate under such tax treaty. Upon approval by the tax authorities, the paid amount in excess of the tax payable based on the tax rate according to such tax treaty will be refunded. The record date and the date of distribution of cash dividends and other arrangements for the investors of Northbound Trading will be the same as those for the holders of A shares of the Company.

211 Profit Distribution to Investors of Southbound Trading

• For investors of the SSE and SZSE (including enterprises and individuals) investing in the H shares of the Company listed on the SEHK (the “Southbound Trading”), the cash dividends for the investors of H shares of Southbound Trading will be paid in RMB. The record date and the date of distribution of cash dividends and other arrangements for the investors of Southbound Trading will be the same as those for the holders of H shares of the Company. Below are relevant taxation policies: Shanghai-Hong Kong Stock Connect: Pursuant to the relevant requirements under the Notice on the Tax Policies Related to the Pilot Program of the Shanghai-Hong Kong Stock Connect (Caishui [2014] No. 81) 《關於滬港股票市場交易互聯互通機制試點有關稅收政策的通知( (財稅[2014]81 號)》), for dividends received by domestic individual investors from investing in H shares listed on the SEHK through Shanghai-Hong Kong Stock Connect, the company of such H shares shall withhold and pay individual income tax at the rate of 20% on behalf of the investors. For dividends received by domestic securities investment funds from investing in H shares listed on the SEHK through Shanghai-Hong Kong Stock Connect, the tax payable shall be the same as that for individual investors. The company of such H shares will not withhold and pay the income tax of dividends for domestic enterprise investors and those domestic enterprise investors shall report and pay the relevant tax themselves.

• Shenzhen-Hong Kong Stock Connect: Pursuant to the relevant requirements under the Notice on the Tax Policies Related to the Pilot Program of the Shenzhen-Hong Kong Stock Connect (Caishui [2016] No. 127) 《關於深港股票市場交易互聯互通機制( 試點有關稅收政策的通知(財稅[2016]127號)》), for dividends received by domestic individual investors from investing in H shares listed on the SEHK through Shenzhen- Hong Kong Stock Connect, the company of such H shares shall withhold and pay individual income tax at the rate of 20% on behalf of the investors. For dividends received by domestic securities investment funds from investing in H shares listed on the SEHK through Shenzhen-Hong Kong Stock Connect, the tax payable shall be the same as that for individual investors. The company of such H shares will not withhold and pay the income tax of dividends for domestic enterprise investors and those domestic enterprise investors shall report and pay the relevant tax themselves.

Shareholders are suggested to consult their tax consultants regarding the tax impacts in China, Hong Kong and other countries (regions) for holding and selling the Company’s shares.

212 VI. Distribution of Cash Dividends of the Company during the Past Three Consecutive Years (including the Reporting Period)

(Unit: RMB million)

2018 2017 2016

Cash dividends 15,105 7,662 10,216 Net profit attributable to equity shareholders of the Company 50,327 49,813 47,843 Cash dividend payout ratio (%) 30.01 15.38 21.35

VII. Cash Dividends Policy of the Company

According to Article 298 of the Articles of Association, the distribution of profits of the Company emphasises reasonable investment returns to investors and shall be sustainable and stable. The Company shall distribute dividends in profit-making years. To the extent that the normal working capital requirement is fulfilled, the Company shall distribute dividends primarily in cash. The profit distributed in the form of cash dividends for each year shall not be less than 10% of the distributable profit attributable to ordinary shareholders of the Company of the year. The Company may distribute interim cash dividends.

If the Company generated profits in the previous accounting year but the Board did not make any cash profit distribution proposal after the end of the previous accounting year, the reasons thereof and the use of proceeds retained by the Company not used for distribution shall be explained in detail in its periodic reports and the Independent Non-executive Directors shall give an independent opinion in such regard. Online voting shall be made available, when such proposal is voted on a general meeting.

In the event that adjustments are required to be made to the Company’s profit distribution policy due to the needs of operation and long-term development of the Company, the amended profit distribution policy shall not violate the relevant requirements of regulatory authorities of the places where the Company is listed. Any proposal regarding adjustments to the profit distribution policy shall be subject to the prior review of the Independent Non-executive Directors and the Board of Supervisors and, after consideration by the Board, be proposed to the general meeting of the Company for approval. Any proposal regarding the adjustments to

213 the Company’s cash dividend policy shall be approved by more than two-thirds of the votes of the shareholders attending the general meeting of the Company. Online voting shall be provided when such proposal is voted on a general meeting.

The profit distribution policy of the Company complies with the Articles of Association and procedures of consideration. The policy is intended to fully protect the legal interests of minority shareholders with clearly specified criteria and proportion of profit distribution. The conditions and procedures of adjustment or change to the profit distribution policy are in compliance with the relevant requirements and principle of transparency.

VIII. Substantial Shareholders

For details of substantial shareholders of the Company, please refer to “Chapter 4 Changes in Share Capital and Information on Shareholders” in this report.

IX. Share Capital and Issuance of Shares and Debentures

For details of share capital and issuance of shares and securities of the Company as at 31 December 2018, please refer to “Chapter 4 Changes in Share Capital and Information on Shareholders” in this report.

X. Auditing Opinions Issued by the Accounting Firm

The 2018 annual financial statements of the Company had been audited by KPMG Certified Public Accountants in accordance with the IFRS. Standard unqualified auditors’ report had been issued accordingly.

XI. Pre-emptive Rights

Pre-emptive rights are not prescribed in the Articles of Association and the Company Law of the PRC, and the Company is not required by the above provisions to issue new shares to the current shareholders based on the holding proportion of the shareholders. In accordance with the Articles of Association, the Company may increase its capital by public offering of ordinary shares, issuance of ordinary shares to its existing shareholders, distribution of new ordinary shares to its existing shareholders, private placing of ordinary shares, conversion of preference shares to ordinary shares, and any other methods permitted by the applicable laws and administrative regulations. There is no compulsory rule in relation to pre-emptive rights in the Articles of Association.

XII. Charity and Other Donations

As at the end of the Reporting Period, the total amount of charitable donations of the Group was RMB175 million.

214 XIII. Directors, Supervisors and Senior Management

For details of the list, profiles, contract arrangements and remunerations of Directors, Supervisors and Senior Management of the Company, please refer to “Chapter 5 Directors, Supervisors, Senior Management and Employees” in this report.

Details of retirement benefits provided by the Company to its employees during the Reporting Period are set out in Notes 13 and 34 (1) to the Financial Statements.

XIV. Contracts of Management and Administrative Management

During the Reporting Period, the Company did not enter into any administrative management contract relating to overall businesses or major businesses of the Company.

XV. Indemnity and Insurance of Directors, Supervisors and Senior Management

During the Reporting Period, the Company has maintained effective liability insurance for the Directors, Supervisors and Senior Management in respect of potential legal proceedings arising from the business operation of the Company.

XVI. Customer Relationship

The Group considers that it is important to maintain good relationship with its customers and strives to provide more efficient and convenient services to customers so as to maximise the value and return. In 2018, there was no significant or material dispute between the Group and its customers.

XVII. Interests of Directors and Supervisors in Major Contracts

The Directors and Supervisors of the Company had no material interests in any major contracts entered into by the Company or its subsidiaries during the Reporting Period.

XVIII. Protection of Rights and Interests of Consumers

During the Reporting Period, the Strategic Development and Investment Management Committee under the Board of the Company considered the special report on the protection of rights and interests of consumers prepared by the Senior Management, studied and discussed the protection of rights and interests of consumers, supervised the comprehensiveness, effectiveness and implementation of the management mechanism of protection of rights and interests of consumers, and considered the work plan for protection of rights and interests of consumers. The office of the Strategic Development and Investment Management Committee under the Board issued a letter to the Senior Management, which requires the Senior Management to report the implementation of protection of rights and interests of consumers, establishing a guiding and supervising mechanism of the Board for the protection of rights and interests of consumers of the Company.

215 During the Reporting Period, the management of protection of rights and interest of consumers of the Company had complied with the laws and regulations, which further promoted the improvements in protection of rights and interests of consumers and strengthened the management and supervision of product procedures. An internal appraisal mechanism for protection of rights and interests of consumers was established in order to advocate the culture, improve the quality and enhance the effectiveness of protection of rights and interests of consumers of the Company. Firstly, in respect of system development, in accordance with regulatory requirements, the Company strengthened areas of weakness in the system. Special programmes such as trainings in relation to protection of rights and interests of consumers and financial knowledge sharing were organised during the year. Secondly, in respect of system mechanism, the Company persists on the mechanism of joint meetings and convenes meetings about protection of rights and interests of consumers on a quarterly basis. During the year, the Company held the first meeting regarding protection of rights and interests of consumers, which provided guidance for better understanding and improving the overall protection. Task list for protection of rights and interests of consumers was introduced in order to ensure the effective implementation of the protection. Thirdly, in respect of financial knowledge sharing and learning activities, the Company organised several related programmes which greatly enriched customers’ knowledge and enhanced their security awareness. These events included “Financial Consumers’ Rights and Interests Promotion Day (金融消費者權益日)” and “Financial Knowledge Promotion Event (金融知識進萬家)”. The Head Office of Minsheng Bank was accredited as “Advanced Unit (先進單位)” of “Financial Knowledge Promotion Event (金融知識進萬家)” by the CBIRC. Fourthly, in respect of product and service management, the Company strengthened the management of key businesses and risk prevention and control in relation to consumers’ rights and interests. Fifthly, in respect of staff management and training, the Company organised a number of trainings concerning protection of rights and interests of consumers in order to enhance their awareness and capabilities of protection of rights and interests of consumers.

216 Chapter 8 Report of the Board of Supervisors

I. Meetings of the Board of Supervisors and Special Committees

During the Reporting Period, a total of eight meetings (including one non-decisive meeting) were convened by the Board of Supervisors, at which 23 resolutions were considered and approved and four reports were received. A total of 11 meetings were convened by the Supervisory Committee under the Board of Supervisors, at which seven resolutions were considered and approved and 19 reports were received. A total of five meetings were convened by the Nomination and Examination Committee under the Board of Supervisors, at which 13 resolutions were considered and approved. The personal attendance of all meetings of the Board of Supervisors and the committees under the Board of Supervisors were 100%.

II. Performance of the Board of Supervisors

During the Reporting Period, with high responsibilities to the regulatory authorities, shareholders and employees as well as the requirement of due diligence, in line with the changing macro economic landscape, the business development of the Bank, the core of the implementation of reform and transformation and three-year plan as well as regulatory requirements, the seventh session of the Board of Supervisors strengthened supervision, diversified supervision methods and sufficiently, efficiently and independently performed its duties of corporate governance so as to ensure the healthy development of the Bank in compliance of relevant requirements.

Supervision of performance. During the Reporting Period, the Board of Supervisors further strengthened supervision on the performance of Directors and Senior Management and improved the corporate governance mechanism to enhance its corporate governance. Firstly, focus was put on the supervision of daily performance and the coverage of appraisal was diversified. Checklist of performance appraisal has been made. When attending meetings of the Board, the Board of Supervisors and their special committees as well as participating in investigations, the Supervisors are required to give written opinions on proposals to be considered at the meetings, reports and investigations, as well as on the performance of Directors and other Supervisors. The Board of Supervisors expanded the coverage of performance appraisal by modifying the performance appraisal system of Directors and Senior Management and self-and peer-appraisal questionnaires. By considering resolutions, listening to presentations, reviewing reports, participating in investigations and attending meetings of the Board and management, the Board of Supervisors conducted supervision on Directors and Senior Management in respect of formulation and implementation of strategies, decision making related to operation, risk management, compliance and internal control, financial management, profit distribution, management of consolidated financial statements, management of related party transactions, event prevention and management and anti-money laundering. The comprehensiveness and objectivity of performance appraisal has been improved. Secondly, supervision on the Directors and Senior Management regarding their performance on conduct management and their remuneration has been strengthened. According to the “Guidelines for the Management of Conduct of Practitioners of Banking Financial Institutions 《銀行業金融機構從業人員行為管理指引》( )”, the Board of Supervisors has further refined the 2018 annual performance appraisal system for the Board and Directors,

217 Senior Management and relevant working plan. After a thorough study of the remuneration and appraisal system of Senior Management, the Board of Supervisors urged to establish a more scientific, rational and prudent remuneration and appraisal system with balance between operation indicators and indicators in relation to risk, internal control and compliance, and between short-term targets and long-term strategies.

Supervision of financial activities. During the Reporting Period, the Board of Supervisors continuously strengthened its supervision and inspection on the accuracy and completeness of major financial activities, important accounting items and regular reports. Firstly, the Board of Supervisors regularly reviewed reports on operation, preparation of regular reports, auditing of financial reports and review results regularly. It proposed working requirements to external auditors and supervised their performance to ensure the work quality of auditors and the truthfulness of financial information and gave independent and objective opinion. As at the end of 2018, the Supervisor representatives were appointed to participate in the engagement of accounting firm in order to supervise the legality and compliance of engagement standard and procedures. Secondly, the Board of Supervisors organised meetings to consider proposals on the changes in accounting policies of the Company for 2017 and the implementation of changes in accounting policy for the first quarter of 2018 and reviewed the report of the Finance and Accounting Department on the impact of adopting new accounting standards of financial instruments. The Board of Supervisors focused on the impact on provisions, asset classification and valuation as well as capital adequacy ratio by the changes in relevant policies and required relevant departments to pay attention to policies of regulators and well perform their duties in accounting, auditing and information disclosure during the implementation of the new accounting standards. Thirdly, the Board of Supervisors analysed the operation results of banking institutions in 2017 and the changes in supervisory indicators in 2018 and prepared supervisory reports. Based on the information disclosed by major listed commercial banks, the Board of Supervisors make comparisons in terms of profitability, asset expansion, asset quality, regulatory indicators, development and efficiency and delivered operation risk alerts to Senior Management in a timely manner whenever necessary.

Supervision of risk management. In the face of increasingly complicated operation environment and risks during the Reporting Period, the Board of Supervisors further strengthened supervision of major risks. 11 reminders in relation to the risk trend and existed problems of the Bank were issued to the relevant departments of the Head Office to improve overall risk management and defend the bottom line of risks. Firstly, the Board of Supervisors strengthened the supervision of credit risk and enhanced risk management and control. The Board of Supervisors paid visits to branches and subsidiaries to conduct on-site investigation and supervision. Investigation reports on issues found were prepared by the Board of Supervisors, proposing to comply with new regulatory requirements and optimise risk management system to all business units. Specific opinions were also given according to the regional operation environment, business model and management features of local branches. All these efforts strongly helped enhance risk management and internal control of the Bank. Furthermore, the Board of Supervisors had held meetings to review general reports on overall risk management as well as specific reports on rating-based credit limit system of corporate customers of the Company and the annul management of ratings and credit limits of 2018. The Board of Supervisors carefully studied the risk management strategies, risk management and control mechanism, determination and transmission mechanism of risk appetite, risk

218 management policies and procedures of the Board and Senior Management as well as the identification, measurement, monitoring and control of risks. The Board of Supervisors discussed problems in the overall risk management and proactively supervised the management enhancement. In addition, by attending meetings of the Board and Senior Management, reviewing internal and external auditing reports and received reports of auditing and reviews for 2017 and the first half of 2018 from external auditors, the Board of Supervisors continued to monitor the changes in credit risk and management of credit business of the Bank, paid attention to asset classification, NPL management, quality management and control of new loans and early-warning loans. Secondly, the Board of Supervisors enhanced its supervision on liquidity, operation and market risks to strengthen risk prevention and control. It reviewed the reports on liquidity risk management of the Bank and received reports on changes in liquidity supervision indicators, asset and liability management of liquidity as well as management and control measures of liquidity risk and monitoring and management of relevant stress tests. The Board of Supervisors also suggested to rationally allocate assets based on the scale of liabilities and maturity structure, prepare emergency plan and conduct stress tests. Furthermore, the Board of Supervisors also received reports on the management of operational risks, reputation risk and credit investigation with focus on organisation structure, responsibility division and management system and tools. It also promptly monitored material incidents of operational risk and consulted the relevant departments when necessary. Moreover, the Board of Supervisors considered reports on the management of stress tests of market risk and interest rate risk of banking account and received reports regarding the mechanism, procedures and measures of interest rate risk management. Thirdly, the Board of Supervisors enhanced its supervision on key business, for example, asset management, and capital management risk to facilitate transformation and development of light-capital operation. The Board of Supervisors received specific reports on the auditing of emerging channel business and credit card business, impact of the implementation of new regulatory requirements and management of wealth management business with focus on the development and compliance, risk management framework and mechanism establishment of relevant businesses. The Board of Supervisors paid visits to Bills Business Department and Supply Chain Finance SBU to conduct researches. The Board of Supervisors prepared research report and made proposals and suggestions for improvements after a thorough study of the strategic planning, current development, customer management, risk management and control, appraisal and incentive system as well as resources allocation of relevant businesses. Furthermore, the Board of Supervisors reviewed report on capital management and received reports on asset and liability management of 2018 and allocation mechanism and plan of economic capital so as to review the performance of the Board and Senior Management on asset and liability management, capital management, advanced capital measurement approach and the evaluation procedure of internal capital adequacy ratio. Fourthly, the Board of Supervisors enhanced its supervision on information technology, management of consolidated financial statements and related party transactions to enhance the overall risk management. The Board of Supervisors received reports on technology risk and data management with focus on the problems in technology risk and following rectifications. The Board of Supervisors proposed suggestions to enhance data management so as to improve data quality. The Board of Supervisors also received the report on the management of consolidated financial statements of the Group, conducted on-site investigations in subsidiaries, focusing on the management framework, management mechanism and management strategies of consolidated financial statements of the Group and problems, and proposed suggestions on the establishment and effectiveness of management mechanism. The Board of Supervisors

219 attended Board meetings to supervise the legality and compliance of consideration and reviewing process of material related party transactions and proposed suggestions on the management mechanism and management procedures of related party transactions. Fifthly, the Board of Supervisors strengthened its supervision of anti-money laundering and regarded the supervision of performance of anti-money laundering as one of the major supervision targets of the Board of Supervisors. The Board of Supervisors also organised seminars to learn the spirit of meetings about anti-money laundering in financial industry, reviewed working reports and received reports from relevant departments. The Board of Supervisors further improved its performance mechanism and procedures of anti-money laundering and promoted proactive risk management culture in anti-money laundering in the Bank to promote operation compliance. Lastly, the Board of Supervisors strengthened risk evaluation to facilitate the implementation of reform and transformation. The Board of Supervisors conducted interim risk evaluation of the Bank with the Board and visited branches to carry out on-site investigations with focus on risk evaluation related to strategic transformation of NSOEs apart from evaluation of regular items. The Board of Supervisors further focused on the operation and management of small business, interbank business and investment banking business so as to facilitate the implementation of strategic transformation and the three-year plan as well as the optimisation of risk management. The Board of Supervisors proactively supervised the auditing of comprehensive risk management conducted by the audit department and reviewed audit plan as well as participated in department interviews to be familiar with the process and results of audit. In consideration of the strategies of business operation and risk management of the Bank, the Board of Supervisors conducted supervision and inspection regarding the completeness and effectiveness of organisation structure of overall risk management, system establishment, decision-making mechanism, management procedure, system implementation, stress test, emergency plan and system support in order to facilitate and ensure the stable business development.

Supervision of internal control. During the Reporting Period, under tightened regulation, the Board of Supervisors further strengthened the supervision and inspection of internal control and remedial measures for problems. Firstly, the Board of Supervisors visited business units to supervise internal control and compliance and learn the mechanism establishment of internal control and compliance operation of business units. The Board of Supervisors concluded the problems of business units in respect of internal control and compliance management in their investigation reports and made proposals and suggestions to facilitate the effective implementation of compliance operation management in the Bank. Secondly, the Board of Supervisors strengthened the supervision on compliance and internal control of overseas branches and subsidiaries. During the year, the Board of Supervisors visited the Hong Kong Branch and CMBC International to conduct investigations, focusing on corporate governance, business development, risk management, internal control and anti-money laundering of overseas business units. The Board of Supervisors also gave suggestions on improvement of corporate governance, group-based management model and coordinated development between business units the Company. Besides, the Board of Supervisors also visited four rural banks to conduct investigations, discussed matters including operation, risk management, internal control and employee management and prepared investigation report on such issues. Thirdly, the Board of Supervisors organised meetings to review the Company’s Internal Control Assessment Report of 2017 and received specific report on internal control and compliance management of 2018 with focus on adjustment in organisation structure of internal control

220 and compliance and division of responsibility, internal control system, compliance risk management, management system of new business and new product, internal control under key risk environment and internal control and compliance accountability. It also supervised the performance of Directors and Senior Management in relevant issues. The relevant departments reviewed the present internal control management, analysed the discrepancy from internal control guidelines and carried out optimisation based on the opinions and suggestions provided by the Board of Supervisors and prepared work reports. This has facilitated the improvement of the management system of internal control and compliance as well as the optimisation of management procedures. Fourthly, the Board of Supervisors reviewed reports on auditing and major findings of 2017, major problems discovered during on-site visits by regulators in 2017, annual auditing work plan of 2018 and plans of major auditing projects of 2018. The Board of Supervisors supervised rectifications. Moreover, by integrating major concerns in auditing, coordinated auditing project and effective use of audit results, the Board of Supervisors expanded supervision scope, improved supervision efficiency, integrated supervision of internal control and compliance into daily work plans and promoted the implementation of legal enforcement and compliance management in the all-around operation and foster the operation principle of legal enforcement and compliance management in all employees.

Strategic supervision. The Board of Supervisors has attached great importance to strategic supervision and continuously investigated, evaluated and supervised the implementation of the Reform and Transformation and Three-Year Development Plan, so as to keep abreast of the implementation results and the problem and difficulties encountered. Firstly, the Board of Supervisors investigated and evaluated the implementation of major projects of Phoenix Project in all branches. The Board of Supervisors organised meetings and interviews in certain branches and sub-branches in order to have in-depth understanding of the effectiveness of pilot projects and problems encountered. The Board of Supervisors formulated evaluation report and proposed suggestions to improve the human resources supporting system in adapting to new business model brought about by the reform and transformation, optimise the customer-centric appraisal and incentive approach and strike a balance between short- term and long-term goals. The report was highly recognised by the Board and management. Secondly, the Board of Supervisors tightened its supervision on the implementation of reform and transformation. In addition to the investigations in branches and sub-branches, the Board of Supervisors continued to supervise the implementation of reform and transformation to understand the progress and effectiveness of the implementation and problems encountered. The Board of Supervisors prepared Briefing Report on the Supervision on Strategic Transformation and Reformation of the Board of Supervisors 《監事會戰略轉型改革監督( 簡報》) and conducted enquiries or arranged interviews with relevant departments regarding issues concerned. The Board of Supervisors fully performed their supervisory functions. In addition, meetings of Board of Supervisors were convened to review reports on the progress of the reform and transformation. Through closely communicating with the Board and the management, the Board of Supervisors kept abreast of the movement of the reform and transformation and was able to know, verify and follow up the progress and implementation of reformation.

During the Reporting Period, the Board of Supervisors expanded its scope of supervision and introduced various supervisory measures pursuant to regulatory requirements and the results were remarkable. Firstly, the Board of Supervisors expanded its supervisory functions and tightened the supervision of the implementation of regulatory requirements. The Board

221 of Supervisors followed up and supervised the rectification of problems identified in on-site inspections and in regulation report for 2017 issued by the CBIRC and continuously monitored the overall progress and results of rectification and accountability. In addition, through cooperation with the audit department, risk management department, legal affairs and compliance department, discipline inspection department and other departments, the Board of Supervisors jointly coordinated, planned and carried out supervision and inspection on the rectification of major problems, so as to further integrate supervision resources and establish a multi-dimension coordination system, which acted as an effective supplement for the supervision of the Board of Supervisors and ensured a more regular and more standardised supervision at all levels. Secondly, the Board of Supervisors established a standard supervision and inspection mechanism. The Board of Supervisors formulated a list of supervisory tasks and established an effective supervision and inspection network with clear division of responsibility and work and standardised working procedure. The Board of Supervisors summarised directions from the Head Office and feedbacks from departments in a timely order so as to respond to all supervisory matters promptly and appropriately. In addition, the Board of Supervisors established a system to transform the achievements of supervision and inspection of Board of Supervisors into operation and management decisions and thus fully performed its supervisory functions.

III. Independent Opinions of the Board of Supervisors

(I) Law-abiding operation of the Company

During the Reporting Period, the Company maintained law-abiding operation and all decision-making procedures were in compliance with the applicable laws, regulations and the Articles of Association. There was no breach of the applicable laws and regulations and the Articles of Association nor any act which would harm the interests of the Company and its shareholders by any Directors or Senior Management in performing their duties.

(II) Authenticity of the financial statements

The annual financial statements of the Company have been audited by KPMG Huazhen LLP and KPMG Certified Public Accountants in accordance with the CAS and the IFRSs, respectively. Standard and unqualified auditors’ reports have been issued accordingly. The Board of Supervisors considered that the financial statements of the Company for the year truthfully, accurately and completely reflected the Company’s financial position and business performance.

(III) Use of proceeds from fund-raising activities

During the Reporting Period, the Company successfully issued two installments of special financial bonds for small and micro enterprises. The first and second installments of special financial bonds of RMB40 billion and RMB20 billion were issued on 22 November 2018 and 14 December 2018, respectively. The proceeds from the above issuance were specifically used for the extension of loans to small and micro enterprises as stated in the prospectus. The Hong Kong Branch successfully issued medium term notes of US1 billion. The proceeds of above issuance were used for working capital and other general corporate purpose.

222 (IV) Acquisition and disposal of assets

During the Reporting Period, there was no new acquisition or disposal of assets of the Company.

(V) Related party transactions

During the Reporting Period, the management of related party transactions of the Company was in compliance with the relevant national laws, regulations and the Articles of Association. There was no act which would harm the interests of the Company and its shareholders.

(VI) Implementation of resolutions adopted at general meetings

The Board of Supervisors raised no objection to the reports and proposals submitted by the Board to the general meetings in 2018 and supervised the implementation of the resolutions adopted at general meetings. The Board of Supervisors is convinced that the Board implemented the resolutions in real earnest.

(VII) Internal control

The Company continued to strengthen and improve its internal control. The Board of Supervisors raised no objection to the Self-evaluation Report of Internal Control for 2018 of the Company. During the Reporting Period, no material defects were found in respect of the completeness, reasonability and effectiveness of the internal control mechanism and system of the Company.

223 Chapter 9 Major Events

I. Material Litigation and Arbitration

During the Reporting Period, the Company had no litigation or arbitration proceeding that had significant impact on its operations. As of the end of the Reporting Period, there were 6,344 pending litigations with disputed amounts of over RMB1 million involving the Company as plaintiff for approximately RMB53,210.2876 million and 250 pending litigations involving the Company as defendant for approximately RMB3,448.4073 million.

II. Purchase and Disposal of Assets and Mergers and Acquisitions

The Company has strictly complied with the Articles of Association, the Basic Accounting Rules 《基本財務規則》( ) and the Administrative Measures on Fixed Assets 《固定資產( 管理辦法》) of the Company. The Company has made arrangements for writing off residual value and account treatment of fixed assets that satisfied the conditions for disposal. The shareholders’ interest has not been prejudiced and the Company has not experienced any loss of assets.

III. Material Contracts and Their Performances

The Company participated in and won the bid for the land use right of Plot Z4 at Core Area of Beijing CBD in East Third Ring Road, Chaoyang District, Beijing. The onsite land handover was completed on 10 May 2018. Architecture firm for the project has been assigned to carry out the architectural design.

The Company participated in and won the bid for the land use right of Plot 2010P26 at the intersection of Douzaiwei Road and Hubin South Road in Xiamen. Construction of the project has been completed and has passed completion inspection. In November 2017, the Xiamen Branch of the Company relocated to the new building and commenced operation. The project is under settlement and auditing.

The Company participated in and won the bid for the land use right of the granted parcel of land of Plot 2012-8 on the north of Headquarters Economic Zone in Donghai Sub-district, Quanzhou. The underground structure of the project was completed in April 2018. It is now undergoing the construction of main buildings and secondary structure construction as well as the installation of fire control, pumping, drainage and air conditioning on the basement floor. The design for construction drawings for decorations and smart appliances has been completed.

The Company participated in and won the bid for the land use right of Plot G at the Strait Financial Business District on the south of Aofeng Road and the east of Aofeng Side road in Taijiang District, Fuzhou. The land handover was completed with Fuzhou Land Development Centre (福州市土地發展中心) in August 2018. The consulting report of project approval is currently being prepared.

The final acceptance of Shunyi Headquarters in Beijing has been completed and the building has been put into operation. The settlement and auditing of the construction has been completed and the transfer of entitlement is in progress. As at the end of the Reporting Period, the change 224 of GFA and use of property have been submitted to Land Price Evaluation Division of Beijing Municipal Bureau of Land and Resources (北京市國土局地價評審科) for the evaluation of the land. The architectural design of phase II of Shunyi Headquarters in Beijing has been completed and the project has been submitted to the Commission of Economy and Informationisation for approval. Meanwhile, the Bank is currently preparing materials for internal approval.

The Company participated in and won the bid for the land use right of the granted parcel of land of Plot Zheng Zheng Dong Chu (2013) No. 4 on the south of Baifo Road and the east of Xuzhuang Street in Zhengdong New District, Zhengzhou, and has completed the earthwork excavation and pile foundation construction. The construction is currently suspended.

The Company participated in and won the bid for the land use right of the granted parcel of land of Plot Zheng Zheng Dong Chu (2014) No. 1 on the west of East Fourth Ring Road and the south of Lianhu Road in Zhengdong New District, Zhengzhou. Currently, the project has not commenced construction.

The Company participated in and won the bid for the land use right of the granted parcel of land of Plot Zheng Zheng Dong Chu (2014) No. 3 on the south of Shangding Road and the west of Mingli Road in Zhengdong New District, Zhengzhou. Currently, the project has not commenced construction.

IV. Major Guarantees

During the Reporting Period, no major guarantees of the Group were required to be disclosed except for the financial guarantees provided in the course of business operation and approved by the PBOC.

V. Commitments by the Company

During the Reporting Period, the Company had no commitment requiring disclosure.

VI. Appointment of Accountants

The annual general meeting of the Company determined to continue to engage KPMG Huazhen LLP and KPMG Certified Public Accountants as the domestic and international auditors of the Company for 2018, respectively.

According to the terms of contracts, the total remuneration agreed between the Company and the auditors in respect of their audit services for the year, including 2018 audit, 2018 interim review, agreed procedures of 2018 quarterly financial statements and audit of internal control for 2018, was RMB12 million, including fees of RMB1.10 million for internal control audit.

As at the end of the Reporting Period, KPMG Huazhen LLP and KPMG Certified Public Accountants have been providing audit services to the Company for eight consecutive years. Dou Youming, the signing accountant, has provided services for the Company for three consecutive years. Jin Naiwen, the signing accountant, has provided services for the Company for four consecutive years.

225 VII. Major Related Party Transactions

The Company did not have any controlling related party or any major related party transaction with its accumulated total transaction amount accounting for more than 5% of the audited net asset value of the Company during the Reporting Period. During the Reporting Period, the related party transactions of the Company were mainly loans to shareholders and related parties. All loans to related parties were extended in compliance with the relevant laws and regulations and according to the credit terms and approval procedures of the Company, and the principal and interests were fully repaid on time, which did not have any adverse impacts on the operating results and financial position of the Company. During the Reporting Period, please refer to note “48. Related Party Transactions” to the consolidated financial statement for the related party transactions subject to the above accounting principle.

In accordance with the requirements of rules 14A.49 and 14A.71 under Chapter 14A of the Hong Kong Listing Rules, the connected transactions and continuing connected transactions of the Company during the Reporting Period were as follows:

Continuing connected transactions between the Company and Anbang Insurance (as defined below) for the agency sale services of financial products

(I) Cooperation Framework Agreement with Anbang Insurance Group Co., Ltd. in 2018

1. Details of the transactions

On 30 August 2018, the 11th meeting of the seventh session of the Board considered and approved the Proposal on Entering into Business Cooperation Framework Agreement for the Agency Sale of Financial Products between the Company and Anbang Insurance Group Co., Ltd. 《關於本公司與安邦保險集團股份有限公司簽署金融產品代理( 銷售業務合作框架協議的議案》) and agreed to enter into the Business Cooperation Framework Agreement for the Agency Sale of Financial Products with Anbang Insurance Group Co., Ltd. (“Anbang Insurance”), a connected person, with a term from 1 January 2018 to 31 December 2018. Pursuant to the agreement, the Company shall provide agency sale services of financial products to Anbang Insurance and its subsidiaries, including but not limited to insurance products, asset management products, funds products and securities products, and charge service fees in return. For the year ended 31 December 2018, the annual cap of the service fees was RMB2 billion, and the actual service fees for the connected transactions were RMB88 million.

The cooperation between the Company and Anbang Insurance is beneficial for both parties to achieve sharing of resources and mutual supplement of advantages which in turn further increases the Company’s incomes from its retail banking intermediary business. In addition, entering into the business cooperation framework agreement can simplify the disclosure procedure and reduce compliance cost of the Company.

As at the date of the above agreement, Anbang Insurance and its subsidiaries held approximately 17.84% equity interests of the Company, and Anbang Insurance was therefore a substantial shareholder of the Company. Thus, Anbang Insurance and its subsidiaries constitute a connected person of the Company and the transactions between

226 the Group and Anbang Insurance and its subsidiaries constitute continuing connected transactions under the Hong Kong Listing Rules. As the highest applicable percentage ratio for the annual cap of the service fees receivable from Anbang Insurance and its subsidiaries under the business cooperation framework agreement for the agency sale services of financial products exceeds 0.1% but is less than 5%, the transactions constitute non-exempted continuing connected transactions of the Company, and are subject to the reporting and announcement requirements but are exempted from the independent shareholders’ approval requirement under Chapter 14A of Hong Kong Listing Rules. For details, please refer to the connected transaction announcement of the Company published on 30 August 2018, respectively, on the HKEXnews website of the SEHK and the website of the Company.

2. Opinions of the Independent Directors

The Independent Non-executive Directors have reviewed the continuing connected party transactions regarding the business cooperation with Anbang Insurance for agency sale services of financial products, and confirmed that the transactions were:

a. entered into in the ordinary and usual course of business of the Company;

b. based on normal or more favorable commercial terms; and

c. based on the terms of agreement governing the relevant transactions, which are fair and reasonable, and without prejudicing the legal interests of other shareholders.

3. Opinions of the auditors

Pursuant to rule 14A.56 of the Hong Kong Listing Rules, the Board engaged KPMG Certified Public Accountants, the international auditor of the Company, to perform relevant procedures on the continuing connected party transactions regarding the business cooperation with Anbang Insurance for agency sale services of financial products according to Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” and with reference to the Practice Note 740 “Auditor’s Letter on Continuing Connected Party Transaction under the Hong Kong Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. The Board confirmed that the auditor has reported the results of its procedures to the Board. Regarding the disclosed connected transactions, nothing has come to the attention of the auditor that:

a. the disclosed continuing connected transactions have not been approved by the Board;

b. for transactions involving the provision of goods or services by the Group, the transactions were not, in all material respects, in accordance with the pricing policies of the Group;

c. the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions;

227 d. the aggregate amount of each of the continuing connected transactions have exceeded the aggregate annual caps in the continuing connected transaction announcement of the Company disclosed on the HKEXnews website of the SEHK and the website of the Company on 30 August 2018.

(II) Cooperation Framework Agreement with Anbang Insurance Group Co., Ltd. in 2019

On 27 December 2018, the 13th meeting of the seventh session of the Board considered and approved the Proposal on the Execution of the Business Cooperation Framework Agreement for Agency Sales of Financial Products between the Company and Anbang Insurance Group Co., Ltd. 《關於本公司與安邦保險集團股份有限公司簽署金融( 產品代理銷售業務合作框架協議的議案》) and agreed to enter into the Business Cooperation Framework Agreement for the Agency Sales of Financial Products with Anbang Insurance, a connected person, with a term from 1 January 2019 to 31 December 2019. Pursuant to the agreement, the Company shall provide agency sale services of financial products to Anbang Insurance and its subsidiaries, including but not limited to insurance products, asset management products, funds products and securities products, and charge service fees in return. For the year ending 31 December 2019, the annual cap of the service fees was RMB3 billion.

As at the date of the above agreement, Anbang Insurance and its subsidiaries held approximately 17.84% equity interests of the Company, and was therefore a substantial shareholder of the Company. Thus, Anbang Insurance and its subsidiaries constitute connected persons of the Company and the transactions between the Group and Anbang Insurance and its subsidiaries constitute continuing connected transactions under the Hong Kong Listing Rules. As the highest applicable percentage ratio for the annual cap of the service fees receivable from Anbang Insurance and its subsidiaries under the business cooperation framework agreement for the agency sales of financial products exceeds 0.1% but is less than 5%, the transactions constitute non-exempted continuing connected transactions of the Company, and are subject to the reporting and announcement requirements but are exempted from the independent shareholders’ approval requirement under Chapter 14A of Hong Kong Listing Rules. For details, please refer to the connected transaction announcement of the Company published on 27 December 2018, respectively, on the HKEXnews website of the SEHK and the website of the Company.

Save as disclosed in this Annual Report, during the Reporting Period, the Company did not have any discloseable connected transaction or continuing connected transaction pursuant to provisions in relation to connected transactions under Chapter 14A of the Hong Kong Listing Rules.

228 VIII. Repurchase, Sale or Redemption of Securities

Save as disclosed in this Annual Report, during the 12 months ended 31 December 2018, the Group has neither sold any securities of the Company nor repurchased or redeemed any securities of the Company.

IX. Audit Committee

As at the end of the Reporting Period, the members of Audit Committee of the Company comprised Liu Ningyu (chairman), Weng Zhenjie, Peng Xuefeng and Tian Suning. On 21 June 2018, Mr. Cheng Hoi-chuen ceased to be an Independent Non-executive Director of the Company due to the expiry of his six-year term of office. On 29 June 2018, the Resolution on the Change of Members of Special Committees of the Seventh Session of the Board 《關於( 調整公司第七届董事會部分專門委員會成員的決議》) was considered and approved at the tenth meeting of the seventh session of the Board. According to the resolution, the Audit Committee of the seventh session of the Board of Directors shall have five members, including Liu Ningyu (chairman), Tian Zhiping, Weng Zhenjie, Peng Xuefeng and Tian Suning. On 3 July 2018, Mr. Tian Zhiping resigned as Director of the Company and member of the related special committees under the Board.

The main responsibilities of the Audit Committee include reviewing and supervising the financial reporting procedures and internal control system of the Company and providing advices to the Board. The Audit Committee of the Company had reviewed and confirmed the 2018 Annual Report and the 2018 Results Announcement for the year ended 31 December 2018.

X. Restriction Commitments regarding Additional Shares for Shareholders with Shareholding of 5% or More in the Company

Not applicable.

XI. Administrative Penalties Imposed on the Company and Directors, Supervisors, Senior Management and Controlling Shareholders of the Company

During the Reporting Period, the Company was not aware of the Company or any of its incumbent Directors, Supervisors or Senior Management being subject to any investigation by the competent authorities or mandatory measures imposed by the judicial authorities or commission for discipline inspection, or handled over to judicial authorities for criminal liabilities, nor any of them being a subject to examination or administrative penalty by the CSRC, or prohibited from the securities market or deemed as ineligible persons, or subject to any material administrative penalty imposed by the environmental protection, safety, taxation and other administrative authorities or publicly censured by any stock exchanges.

229 XII. Incentive Share Option Scheme and its Implementation during the Reporting Period

Up to date, the Company has not implemented any employee share ownership scheme.

XIII. Integrity of the Company, Controlling Shareholders and Ultimate Controller

The Company does not have any controlling shareholder or ultimate controller. During the Reporting Period, the Company did not have any effective court ruling which was not implemented or any overdue debt in large amounts.

XIV. Non-operating Fund Occupation by Controlling Shareholders and Other Related Parties

The Company does not have any controlling shareholder and does not have any non-operating fund occupation by other related parties.

XV. Performance of Social Responsibilities and Poverty Alleviation Work

(I) Performance of social responsibilities

Adhering to its mission of “From the People, For the People (為民而生，與民共生)”, the Company keep firmly in mind the responsibility and awareness of “Minsheng servicing the community, showing our care to win the love of the general public to Minsheng”. The Company has regarded reform and innovation as the Company’s responsibility and was committed to deepening the reform of its systems and mechanisms according to the national strategies. The Company also strongly promoted inclusive finance to continuously support NSOEs. The Company had also put much efforts on targeted poverty alleviation. To advance the development of ecological civilisation, the Company placed emphasis on people’s livelihood and contributed to society as we always do, which made contributions to the development of the Company, advancement of the society and improvement in people’s livelihood. The Company’s performance of social responsibility has marked a new milestone.

During the Reporting Period, the Company enhanced its performance in social responsibility management by formulating Targeted Poverty Alleviation Plan for 2018 《( 2018年定點扶貧計劃》), optimising the fourth round of “Power of Minsheng’s Love — ME Charity Innovation Funding Scheme (我決定民生愛的力量 — ME 公益創新資助計劃)” and enriching the approaches of target poverty alleviation. To meet the specific demand of the target counties stricken with poverty, the Company improved the effectiveness of target poverty alleviation through adopting Seven-in-One poverty alleviation approach, which aimed to alleviate poverty from seven aspects, including finance, industry, education, healthcare, E-commerce, skills and consumption. The Company actively implemented the resolutions of the public welfare decision-making committee, promoting the free medical care programme for Tibetan children with congenital heart disease, supporting the AIDS prevention project initiated by China Red Ribbon, financing the Dunhuang protection project as well as prepared social responsibility report. All these efforts enhanced the influence of key projects and image of the Company as a responsible corporate was further improved.

230 The Company’s social responsibility practices in 2018 were highly recognised by the third parties such as relevant government authorities, charity organisations and mainstream media, and was awarded important prizes including the 10th “Chinese Charity Award (中華慈善獎)” by Public Affairs Department, the highest government charity award, “Best Charity Contribution Award (最佳公益慈善貢獻獎)” by China Banking Association, the “Outstanding Poverty Alleviation Case (扶貧優秀案例)” by the Leading Group Office of Poverty Alleviation and Development of the State Council and the Chinese Academy of Social Sciences. The Company ranked first in the Top 100 NSOEs of Social Responsibility (中國民營企業社會責任100強) and in the Social Responsibility Index of China’s Banking Industry (中國銀行業社會責任指數) by the Chinese Academy of Social Sciences. The Company was also awarded “Best 10 NSOEs — 10 Years of Social Responsibility Development of Chinese Enterprises (中國企業社會責任發展十年•民企十佳) ” by the Chinese Academy of Social Sciences, “Corporate Social Responsibility Award (企業社會責任獎)” by Shanghai Securities News and “Best Enterprises of Social Responsibility (最佳責任企業)” by Southern Weekly. The Social Responsibility Report for 2017 of the Company was praised as “Five-star Corporate Social Responsibility Report (五星級企業社會責任報告)”.

For details of the Social Responsibility Report for 2018 《( 2018年度社會責任報告》) of the Company, please visit the website of the Company (www.cmbc.com.cn) and the website of the SSE (www.sse.com.cn).

(II) Performance of poverty alleviation work

During the Reporting Period, based on the guidance of the strategic mindset of poverty alleviation and development proposed by President Xi Jinping and the leadership and support of the Leading Group Office of Poverty Alleviation and Development of the State Council and the PBOC, the Company further improved work mechanism, enhanced awareness and focused on innovations in targeted poverty alleviation. Emphasis was placed on the integrated efforts for poverty alleviation, encouragement and education. These initiatives were proven effective in terms of poverty alleviation and even elimination of poverty, facilitating the development of poverty-stricken areas and increasing the income of the poor. As such, the Company has made remarkable contribution to the success of poverty alleviation. In 2018, the Company donated RMB48.012 million for poverty alleviation and set aside RMB6,751.9538 million as targeted poverty alleviation loans, of which RMB4,864.9581 million was for individuals and RMB1,886.9957 million was for enterprises.

1. Effective poverty alleviation plan

Hua County and Fengqiu County in Henan Province have been the targeted poverty alleviation counties of the Company. The Company formulated the Targeted Poverty Alleviation Plan for 2018 《( 2018 年定點扶貧計劃》) based on the work plans for poverty elimination and actual needs of these two counties and the business features of the Company after consulting with relevant departments.

The Targeted Poverty Alleviation Plan for 2018 was introduced strictly in accordance with the strategic objective of the central government in respect of poverty elimination. Adhering to the principles of targeted poverty alleviation and elimination, under the guidance of enhancing the effectiveness of poverty alleviation, the Company improved

231 mechanism and enriched the approaches of poverty alleviation. The Company also allocated additional resources, made use of its expertise in the banking industry and integrated internal and external resources to practically perform duties to facilitate Hua County to consolidate the achievement of poverty alleviation and help Fengqiu County out of poverty.

2. Overview of poverty alleviation for the year

The leaders of the Company highly addressed the substantial implementation of the guidance and strategies of the central government and the State Council in respect of poverty elimination. All employees of the Company placed great emphasis on poverty relief and worked hard to lift the people with low incomes out of poverty according to the schedule.

During the Reporting Period, adhering to the mindset of “effects are more important than figures (要以效果為標準，不以規模為指標)” and taking the advantage of its experience in banking sector and its flexible operation and management system, the Company provided stronger financial support and integrated social resources to poverty alleviation. The Company continued to adopt the Seven-in-One poverty alleviation approach, which aimed to alleviate poverty from seven aspects, including education, healthcare, finance, industry, skills, consumption and E-commerce. The Company proactively pushed forward targeted poverty alleviation of Hua County and Fengqiu County, helping Hua County to consolidate the achievement of poverty alleviation and help Fengqiu County out of poverty.

232 3. Achievements of targeted poverty alleviation

(Unit: RMB ten thousand) Indicator Amount and progress I. General information

Of which: Amount for Balance 1. Funds the year Amount 679,996.58 314,398.96 Of which: Poverty 486,495.81 188,923.83 alleviation loans to individuals Poverty 188,699.57 120,673.93 alleviation loans to enterprises Donations for 4,801.2 4,801.2 the year 2. Number of poverty- 4,660 stricken people helped to be removed from administrative record for poverty registering (person) II. Input in different dimensions 1. Poverty alleviation through industrial development Of which: √ Agriculture and Forestry 1.1 Type of industrial  Tourism development projects √ E-commerce  Return on assets  Technology √ Others 1.2 Number of industrial 34 (Number of enterprises with poverty alleviation loans) development projects 1.3 Amount invested for 189,299.57 industrial development projects 1.3.1 Amount of direct 600 capital investment 1.3.2 Amount of loans 188,699.57 extended

233 Indicator Amount and progress 1.4 Number of poverty- 4,660 stricken people helped to be removed from administrative record for poverty registering (person) 2. Poverty alleviation through transfer employment Of which: 534 2.1 Amount invested for vocational training 2.2 Number of people 966 received vocational training (person/time) 2.3 Number of poverty- 99 stricken people helped to gain jobs 3. Poverty alleviation through education Of which: 234 3.1 Amount of subsidies to poor students 3.2 Number of poverty- 930 stricken students subsidised (person) 3.3 Amount invested for 650 the improvement in educational resources in poverty-stricken areas 4. Poverty alleviation through healthcare Of which: 286 4.1 Amount invested for improvements in medical and healthcare resources in poverty- stricken areas 5. Poverty alleviation through public welfare Of which: 0 5.1 Amount invested for poverty alleviation coordination between Eastern and Western China 5.2 Amount invested 30,614 for targeted poverty alleviation

234 Indicator Amount and progress 5.3 Public charity 2,467.2 foundation for poverty alleviation 6. Poverty alleviation through other approaches Of which: 0 6.1 The number of projects 6.2 Amount invested 0 6.3 Number of poverty- 0 stricken people helped to be removed from administrative record for poverty registering (person) 6.4 Other III. Awards (details and grades) The 10th China Charity Award, the highest charity award of the government (中國公益領域最高政府獎第十屆 “中華慈善獎”) “Outstanding Poverty Alleviation Case (優秀扶貧案例獎)” in 2018 by the Leading Group Office of Poverty Alleviation and Development of the State Council and the Chinese Academy of Social Sciences Selected as one of the Outstanding Poverty Alleviation Cases of Enterprises (《企業扶貧優秀案例》) by the Chinese Academy of Social Sciences

4. Continuing targeted poverty alleviation plan

Target poverty alleviation conducted by institutions under the leadership of central goverment is an important part of promoting development and alleviating poverty programme with Chinese characteristics and is an important embodiment of China’s political and system advantages. In 2019, based on the guidance of the strategic mindset of poverty alleviation and development proposed by President Xi Jinping and the leadership and support of the Leading Group Office of Poverty Alleviation and Development of the State Council and the PBOC, the Company will continuously promote the senses of responsibility, mission and urgency and persist in targeted poverty alleviation and elimination. Leveraging on the advantages of the banking industry and the actual demands of the poverty-stricken areas, the Company will optimise working system, innovate approaches and improve the efficiency of poverty alleviation so as to make new and greater contribution to poverty elimination.

235 XVI. Other Major Events

Pursuant to the approvals by the CBIRC and the PBOC, the Company successfully issued tier- two capital bonds with an aggregate amount of RMB15 billion in the national interbank bond market. For details, please refer to the announcement of the Company dated 11 January 2018 published on the website of the Company at www.cmbc.com.cn and the HKEXnews website of the Hong Kong Stock Exchange at www.hkexnews.hk.

Pursuant to the approvals by the CBIRC and the PBOC, the Company successfully issued special financial bond for small and micro enterprises with an aggregate amount of RMB40 billion in the national interbank bond market. For details, please refer to the announcement of the Company dated 22 November 2018 published on the website of the Company at www.cmbc.com.cn and the HKEXnews website of the Hong Kong Stock Exchange at www.hkexnews.hk.

Pursuant to the approvals by the CBIRC and the PBOC, the Company successfully issued special financial bond for small and micro enterprises with an aggregate amount of RMB20 billion in the national interbank bond market. For details, please refer to the announcement of the Company dated 14 December 2018 published on the website of the Company at www.cmbc.com.cn and the HKEXnews website of the Hong Kong Stock Exchange at www.hkexnews.hk.

The Company obtained the approval from the CBIRC (Yin Bao Jian Fu [2018] No. 469) (銀保監覆[2018]469 號) for the issuance of tier-two capital bonds with an aggregate amount up to RMB40 billion. For details, please refer to the announcement of the Company dated 28 December 2018 published on the website of the Company at www.cmbc.com.cn and the HKEXnews website of the Hong Kong Stock Exchange at www.hkexnews.hk.

236 Chapter 10 Financial Reports

I. Independent Auditor’s Report

II. Financial Statements (Consolidated Statement of Profit or Loss, Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated and the Bank’s Statement of Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows)

III. Notes to the Financial Statements for the Year 2018

IV. Unaudited Supplementary Information of Financial Statements for the Year 2018

237 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (a joint stock company incorporated in the People’s Republic of China with limited liability)

Opinion

We have audited the consolidated financial statements of China Minsheng Banking Corp., Ltd. (the “Bank”) and its subsidiaries (the “Group”) set out on pages 252 to 432, which comprise the consolidated and the Bank’s statements of financial position as at 31 December 2018, the consolidated statement of profit or loss, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Bank and of the Group as at 31 December 2018 and of the consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (“IASB”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the requirements of the code of Ethics for Professional Accountants issued by International Ethics Standards Board for Accountants (“Code”) together with any ethical requirements that are relevant to our audit of the consolidated financial statements in the People’s Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

238 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In particular, the determination of expected • with the assistance of our internal specialists credit loss model is heavily dependent on the in financial risk management, assessing external macro environment and the Group’s the reliability of the expected credit loss internal credit risk management strategy. The model used by management in determining expected credit losses for corporate loans and loss allowances, including assessing the financial assets measured at amortized cost are appropriateness of the key parameters and derived from estimates including the historical assumptions in the expected credit loss losses, internal and external credit grading model, including the identification of loss and other adjustment factors. The expected stages, probability of default, loss given credit losses for personal loans are derived default, exposure at default, discount rate, from estimates whereby management takes adjustments for forward-looking information into consideration historical overdue data, the and other management adjustments; historical loss experience for personal loans and other adjustment factors.

239 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

Loss allowances of loans and financial assets measured at amortized cost (continued) Refer to note 21 and note 22(3) to the consolidated financial statements and the accounting policies in note 2(5)(v). The Key Audit Matter How the matter was addressed in our audit Management also exercises judgement in • assessing the completeness and accuracy determining the quantum of loss given default of data used for the key parameters in based on a range of factors. These include the expected credit loss model. For key available remedies for recovery, the financial parameters derived from internal data situation of the borrower, the recoverable relating to original loan agreements, we amount of collateral, the seniority of the claim compared the total balance of the loan and and the existence and cooperativeness of other financial assets list used by management to creditors. Management refers to valuation assess the allowances for impairment with reports issued by qualified third party valuers the general ledger, selecting samples and and considers the influence of various factors comparing individual loan and financial including the market price, location and use assets information with the underlying when assessing the value of property held as agreements and other related documentation collateral. The enforceability, timing and means to assess the accuracy of compilation of of realisation of collateral can also have an the loan and financial assets list. For key impact on the recoverable amount of collateral parameters derived from external data, we and, therefore, the amount of loss allowances as selected samples to inspect the accuracy of at the end of reporting period. such data by comparing them with public resources; We identified the impairment of loans and advances to customers and financial assets • for key parameters involving judgement, measured at amortized cost as a key audit critically assessing input parameters by matter because of the inherent uncertainty and seeking evidence from external sources and management judgment involved and because comparing to the Group’s internal records of its significance to the financial results and including historical loss experience and type capital of the Group. of collateral. As part of these procedures, we challenged management’s revisions to estimates and input parameters compared with prior period and on transition to the new accounting standard and considered the consistency of judgement. We compared the economic factors used in the models with market information to assess whether they were aligned with market and economic development;

240 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

• evaluating the reasonableness of the management’s judgment as to whether the credit risk of loans and advances to customers or financial assets measured at amortized cost has increased significantly since the initial recognition and whether the credit impairment has occurred by selecting a risk-based sample for credit review. We analysed the loan portfolio by industry sector to select samples for credit review in industries more vulnerable to the current economic situation. We also selected samples based on other risk criteria, including but not limited to borrowers with adverse press coverage and from the Group’s overdue report;

241 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

• evaluating whether the disclosure related to loss allowance for loans and advances to customers and financial assets measured at amortized cost meets the disclosure requirements of related financial reporting standards.

242 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

Fair value of financial instruments (continued) Refer to note 49 to the consolidated financial statements and the accounting policies on in note 2(5)(vi). The Key Audit Matter How the matter was addressed in our audit Financial instruments carried at fair value Our audit procedures to assess the fair value of account for a significant part of the Group’s financial instruments included the following: assets and liabilities. The effect of fair value adjustments of financial instruments may impact • assessing the design, implementation and either the profit or loss or other comprehensive operating effectiveness of key internal income. controls over the valuation, independent price verification, front office and back The valuation of the Group’s financial office reconciliations and model approval instruments, held at fair value, is based on for financial instruments; a combination of market data and valuation models which often require a considerable • assessing the level 1 fair values, on a sample number of inputs. Many of these inputs basis, by comparing the fair values applied are obtained from readily available data, in by the Group with publicly available market particular for level 1 and level 2 financial data; instruments in the fair value hierarchy, the valuation techniques for which use • engaging our internal valuation specialists quoted market prices and observable inputs, to assist us in performing independent respectively. Where such observable data is valuations, on a sample basis, of level 2 and not readily available for valuation techniques, level 3 financial instruments and comparing as in the case of level 3 financial instruments, our valuations with the Group’s valuations. estimates need to be developed which can Our procedures included developing parallel involve significant management judgement. models, obtaining inputs independently and verifying the inputs; The Group has developed its own models to value certain level 2 and level 3 financial instruments, which also involves significant management judgement.

We identified assessing the fair value of financial instruments as a key audit matter because of the degree of complexity involved in valuing certain financial instruments and the degree of judgement exercised by management in determining the inputs used in the valuation models.

243 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

Fair value of financial instruments (continued) Refer to note 49 to the consolidated financial statements and the accounting policies on in note 2(5)(vi). The Key Audit Matter How the matter was addressed in our audit • assessing the appropriate application of fair value adjustments that form an integral part of fair values, inquiring of management about any changes in the fair value adjustments methodology and assessing the appropriateness of the inputs applied; and

• assessing whether the financial statement disclosures appropriately reflected the Group’s exposure to financial instrument valuation risk with reference to the requirements of the related financial reporting standards.

244 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

Consolidation of structured entities (continued) Refer to note 45 and note 46 to the consolidated financial statements and the accounting policies in note 2(2)(ii). The Key Audit Matter How the matter was addressed in our audit Structured entities are generally created to Our audit procedures to assess the consolidation achieve a narrow and well defined objective with of structured entities included the following: restrictions around their ongoing activities. The Group may acquire or retain an ownership interest • making enquiries of management and in, or act as a sponsor to, a structured entity inspecting documents relating to the through issuing a wealth management product, judgement process over whether a structured an investment fund, an asset management plan, a entity is consolidated or not to assess whether trust plan or an asset-backed security. the Group has a robust process in this regard;

In determining whether a structured entity • performing the following procedures for is required to be consolidated by the Group, structured entities on a sample basis: management is required to consider the power the Group is able to exercise over the activities — inspecting selected contracts, internal of the entity and its ability to influence its own establishment documents and returns from the entity. These factors are not information disclosed to the investors purely quantitative and need to be considered to understand the purpose of the collectively. establishment of the structured entities and the involvement the Group has with We identified the consolidation of structured the structured entities and to assess entities as a key audit matter because of the management’s judgement over whether complex nature of certain of these structured the Group has the ability to exercise entities. power over the structured entities;

245 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

Consolidation of structured entities (continued) Refer to note 45 and note 46 to the consolidated financial statements and the accounting policies in note 2(2)(ii). The Key Audit Matter How the matter was addressed in our audit — inspecting the risk and reward structure of the structured entities, including any capital or return guarantee, provision of liquidity support, commission paid and distribution of the returns, to assess management’s judgement as to exposure, or rights, to variable returns from the Group’s involvement in such entities;

— evaluating management’s analyses of the structured entities including qualitative analyses and calculations of the magnitude and variability associated with the Group’s economic interests in the structured entities to assess management’s judgement over the Group’s ability to influence its own returns from the structured entities;

— assessing management’s judgement over whether the structured entities should be consolidated or not; and

• assessing the disclosures in the consolidated financial statements in relation to structured entities with reference to the requirements of the prevailing accounting standards.

246 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

Adjustments and disclosures in relation to transition to the new financial instruments standards (continued) Refer to note 4(1) to the consolidated financial statements and the accounting policies in note 2(1). The Key Audit Matter How the matter was addressed in our audit The Group has applied IFRS 9 since 1 January Our audit procedures relating to the transition to 2018. the new financial instruments standards included the following: IFRS 9 revised the requirements for the classification and measurement of financial • assessing the key internal controls of the instruments previously adopted, and requires financial reporting process related to the the loss allowance of expected credit losses transition to the new financial instruments to be recognized for relevant financial assets standards, including internal control and credit commitments. In addition, it also processes related to the selection and provides greater flexibility of transaction types approval of accounting policy and expected in applying hedging accounting. The Group is credit loss model methodology, information required to make retrospective adjustments on system related controls, etc; the classification and measurement, the loss allowance, and hedge accounting of financial • assessing the accuracy of the classification instruments in accordance with the requirements of financial instruments, including obtaining of the new financial instruments standards. a list of financial instruments classified by management as at 1 January 2018, selecting We identified the adjustments and disclosures samples to check the contractual cash flow in relation to the transition to the new financial terms, and understanding and evaluating instruments standards as a key audit matter, the business model of the relevant financial because of the complexity of the transition instrument portfolio; process which involved changes in internal controls of the financial reporting process, • engaging our internal valuation specialists to accounting treatments, and application of new assist us in evaluating the valuation method system data; also, management judgment was of financial assets and the key parameters applied. used for financial assets that are measured at fair value due to changes in classification and measurement, and selecting samples to independently verify their fair value;

247 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

• obtaining a list of hedge accounting items as at 1 January 2018 and selecting samples and checking relevant hedging documents to determine whether they meet the requirements of IFRS 9;

• obtaining journal entries relating to adjustments made on transition to the new financial instruments standards and comparing them with the list of classification, valuation, expected credit loss of financial instruments, to assess the completeness and accuracy of adjustment journals, and assessing whether the journal entries in relation to transition to the new financial instruments standards were in compliance with the prevailing accounting standards; and

248 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Key audit matters (continued)

Information other than the consolidated financial statements and auditor’s report thereon

The Directors are responsible for the other information. The other information comprises all the information included in the annual report, other than the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the consolidated financial statements

The Directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

The Directors are assisted by the Audit Committee in discharging their responsibilities for overseeing the Group’s financial reporting process.

249 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. This report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

250 Independent auditor’s report to the shareholders of China Minsheng Banking Corp., Ltd. (continued) (a joint stock company incorporated in the People’s Republic of China with limited liability)

Auditor’s responsibilities for the audit of the consolidated financial statements (continued)

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, related safeguards.

From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Lee Lok Man.

KPMG Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong

29 March 2019

251 Consolidated Statement of Profit or Loss For the year ended 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

Note 2018 2017

Interest income 235,347 230,910 Interest expense (158,667) (144,358)

Net interest income 6 76,680 86,552

Fee and commission income 52,684 54,068 Fee and commission expense (4,553) (6,326)

Net fee and commission income 7 48,131 47,742

Net trading gain 8 24,267 1,366 Net gain arising from disposals of securities and discounted bills 9 3,051 3,874 Other operating income 2,032 2,413 Operating expenses 10 (49,056) (47,245) Impairment losses on assets 11 — (34,140) Credit impairment losses 12 (46,274) — Other impairment losses (46) —

Profit before income tax 58,785 60,562

Income tax expense 14 (8,455) (9,640)

Net profit 50,330 50,922

Net profit attributable to: Equity shareholders of the Bank 50,327 49,813 Non-controlling interests 3 1,109

50,330 50,922

Earnings per share (expressed in RMB) 15 Basic earnings per share (restated for comparative period) 1.14 1.13 Diluted earnings per share (restated for comparative period) 1.14 1.13

The accompanying notes form an integral part of these financial statements. 252 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

2018 2017

Net profit 50,330 50,922

Other comprehensive income:

Items that may be reclassified subsequently to profit or loss: Changes in fair value of debt securities at fair value through other comprehensive income 5,112 — Credit losses of debt securities at fair value through other comprehensive income 1,079 — Transfer to profit or loss (360) — Less: income tax relating to debt securities at fair value through other comprehensive income (1,522) — Change in fair value of available-for-sale securities — (1,104) Transfer to profit or loss — (2,732) Less: income tax relating to available-for-sale securities — 957 Cash flow hedging reserve 35 958 Less: income tax relating to cash flow hedging instruments (9) (240) Exchange difference on translating foreign operations 392 (453)

Other comprehensive income, net of tax 4,727 (2,614)

Total comprehensive income 55,057 48,308

Total comprehensive income attributable to: Equity shareholders of the Bank 55,018 47,293 Non-controlling interests 39 1,015

55,057 48,308

The accompanying notes form an integral part of these financial statements. 253 Consolidated Statement of Financial Position As at 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

Note 2018 2017

ASSETS

Cash and balances with central bank 16 389,281 442,938 Balances with banks and other financial institutions 17 52,154 75,257 Precious metals 7,205 20,836 Positive fair value of derivatives 18 33,112 18,734 Placements with banks and other financial institutions 19 246,525 143,205 Financial assets held under resale agreements 20 39,190 52,812 Loans and advances to customers 21 3,008,272 2,729,788 Financial investments: 22 1,970,017 2,135,897 — Financial assets at fair value through profit or loss 381,093 74,601 — Financial assets at fair value through other comprehensive income 461,693 — — Financial assets measured at amortised cost 1,127,231 — — Available-for-sale securities — 378,889 — Held-to-maturity securities — 708,244 — Loans and receivables — 974,163 Long-term receivables 23 110,824 101,304 Property and equipment 24 48,765 48,338 Deferred income tax assets 25 30,691 29,162 Investments in associates — 21 Other assets 27 58,786 103,794

Total assets 5,994,822 5,902,086

LIABILITIES

Borrowings from central bank 304,323 335,173 Deposits from customers 28 3,194,441 2,966,311 Deposits and placements from banks and other financial institutions 29 1,091,860 1,315,993 Financial liabilities at fair value through the profit or loss 987 3,373 Negative fair value of derivatives 18 18,000 18,076 Financial assets sold under repurchase agreements 30 89,687 107,522 Borrowings from banks and other financial institutions 31 125,043 146,999 Provisions 32 1,371 809 Debt securities issued 33 674,523 501,927 Current income tax liabilities 8,728 11,807 Deferred income tax liabilities 25 123 65 Other liabilities 34 54,735 104,219

Total liabilities 5,563,821 5,512,274

The accompanying notes form an integral part of these financial statements. 254 Consolidated Statement of Financial Position (continued) As at 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

Note 2018 2017

EQUITY

Share capital 35 43,782 36,485 Other equity instrument Including: Preference shares 36 9,892 9,892 Reserves Capital reserve 35 57,470 64,753 Surplus reserve 37 39,911 34,914 General reserve 37 74,370 74,168 Other reserves 1,518 (4,662) Retained earnings 37 193,131 163,420

Total equity attributable to equity shareholders of the Bank 420,074 378,970

Non-controlling interests 38 10,927 10,842

Total equity 431,001 389,812

Total liabilities and equity 5,994,822 5,902,086

Approved and authorised for issue by the Board of Directors on 29 March 2019.

Hong Qi Zheng Wanchun Chairman Director and President

Liu Ningyu (Company Seal) Director

The accompanying notes form an integral part of these financial statements. 255 Statement of Financial Position As at 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

Note 2018 2017

ASSETS

Cash and balances with central bank 16 385,239 438,071 Balances with banks and other financial institutions 17 38,688 50,149 Precious metals 7,205 20,836 Positive fair value of derivatives 18 33,007 18,696 Placements with banks and other financial institutions 19 264,255 145,705 Financial assets held under resale agreements 20 35,284 47,855 Loans and advances to customers 21 2,993,146 2,714,957 Financial investments: 22 1,954,382 2,125,116 — Financial assets at fair value through profit or loss 378,301 71,957 — Financial assets at fair value through other comprehensive income 456,904 — — Financial assets measured at amortised cost 1,119,177 — — Available-for-sale securities — 377,315 — Held-to-maturity securities — 708,244 — Loans and receivables — 967,600 Property and equipment 24 22,366 21,559 Deferred income tax assets 25 29,500 28,205 Investment in subsidiaries 26 6,396 5,385 Other assets 27 36,744 77,362

Total assets 5,806,212 5,693,896

LIABILITIES

Borrowings from central bank 303,837 334,500 Deposits from customers 28 3,167,112 2,936,021 Deposits and placements from banks and other financial institutions 29 1,098,044 1,324,632 Financial liabilities at fair value through profit or loss 873 3,373 Negative fair value of derivatives 18 17,995 18,057 Financial assets sold under repurchase agreements 30 88,628 107,390 Provisions 32 1,370 808 Debt securities issued 33 669,396 500,929 Current income tax liabilities 8,578 11,402 Other liabilities 34 37,278 84,594

Total liabilities 5,393,111 5,321,706

The accompanying notes form an integral part of these financial statements. 256 Statement of Financial Position (continued) As at 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

Note 2018 2017

EQUITY

Share capital 35 43,782 36,485 Other equity instrument Including: Preference shares 36 9,892 9,892 Reserves Capital reserve 35 57,150 64,447 Surplus reserve 37 39,911 34,914 General reserve 37 73,129 73,129 Other reserves 1,342 (4,866) Retained earnings 37 187,895 158,189

Total equity 413,101 372,190

Total liabilities and equity 5,806,212 5,693,896

Approved and authorised for issue by the Board of Directors on 29 March 2019.

Hong Qi Zheng Wanchun Chairman Director and President

Liu Ningyu (Company Seal) Director

The accompanying notes form an integral part of these financial statements. 257 Consolidated Statement of Changes in Equity For the year ended 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

Attributable to equity shareholders of the Bank Reserves Other Investment Cash flow Non- Share equity Capital Surplus General revaluation Exchange hedging Retained controlling Total capital instrument reserve reserve reserve reserve reserve reserve Subtotal earnings Total interests equity

Note 35 36 35 37 37 40 40 37 38

At 31 December 2017 36,485 9,892 64,753 34,914 74,168 (4,757) 98 (3) 169,173 163,420 378,970 10,842 389,812

Changes in accounting policies — — — — — 1,489 — — 1,489 (11,527) (10,038) (148) (10,186)

At 1 January 2018 36,485 9,892 64,753 34,914 74,168 (3,268) 98 (3) 170,662 151,893 368,932 10,694 379,626

Net profit — — — — — — — — — 50,327 50,327 3 50,330 Other comprehensive income, net of tax — — — — — 4,401 264 26 4,691 — 4,691 36 4,727

Total comprehensive income — — — — — 4,401 264 26 4,691 50,327 55,018 39 55,057

Appropriation to surplus reserve 37 — — — 4,997 — — — — 4,997 (4,997) — — — Appropriation to general reserve 37 — — — — 196 — — — 196 (196) — — — Cash dividends 39 — — — — — — — — — (3,834) (3,834) (29) (3,863) Capital injection by non-controlling shareholders — — 98 — — — — — 98 (1) 97 242 339 Change in shareholdings in subsidiaries — — (84) — 6 — — — (78) (61) (139) (13) (152) Ordinary shares converted from capital reserve 7,297 — (7,297) — — — — — (7,297) — — — — Disposal of subsidiaries — — — — — — — — — — — (6) (6)

At 31 December 2018 43,782 9,892 57,470 39,911 74,370 1,133 362 23 173,269 193,131 420,074 10,927 431,001

The accompanying notes form an integral part of these financial statements. 258 Consolidated Statement of Changes in Equity (continued) For the year ended 31 December 2017 (Expressed in millions of Renminbi, unless otherwise stated)

Note 35 36 35 37 37 40 40 37 38

At 1 January 2017 36,485 9,892 64,744 30,052 72,929 (1,834) 413 (721) 165,583 130,630 342,590 9,437 352,027

Net profit — — — — — — — — — 49,813 49,813 1,109 50,922 Other comprehensive income, net of tax — — — — — (2,923) (315) 718 (2,520) — (2,520) (94) (2,614)

Total comprehensive income — — — — — (2,923) (315) 718 (2,520) 49,813 47,293 1,015 48,308

Appropriation to surplus reserve 37 — — — 4,862 — — — — 4,862 (4,862) — — — Appropriation to general reserve 37 — — — — 1,239 — — — 1,239 (1,239) — — — Cash dividends 39 — — — — — — — — — (10,921) (10,921) (15) (10,936) Acquisition of subsidiaries — — — — — — — — — — — 415 415 Equity transactions with non-controlling interests — — 9 — — — — — 9 (1) 8 (10) (2)

At 31 December 2017 36,485 9,892 64,753 34,914 74,168 (4,757) 98 (3) 169,173 163,420 378,970 10,842 389,812

The accompanying notes form an integral part of these financial statements. 259 Consolidated Cash Flow Statement For the year ended 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

2018 2017

Cash flows from operating activities: Profit before income tax 58,785 60,562 Adjustments for: — Impairment losses on assets — 34,140 — Credit impairment losses 46,274 — — Other impairment losses 46 — — Depreciation and amortisation 7,197 4,794 — Changes in provisions (862) (266) — (Gains)/losses on disposal of property and equipment and other long-term assets (17) 96 — Gains from changes in fair value (8,357) (1,742) — Net gains on disposal of investment securities (12,307) (2,797) — Interest expense on debt securities issued and other financing activities 23,632 18,947 — Interest income from investment securities (60,987) (76,557)

53,404 37,177

Changes in operating assets: Net decrease in balances with central bank, banks and other financial institutions 73,350 155,273 Net (increase)/decrease in placements with banks and other financial institutions (70,073) 16,646 Net decrease in financial assets held under resale agreements 13,784 37,581 Net increase in loans and advances to customers (312,907) (365,169) Net (increase)/decrease in other operating assets (22,832) 16,459

(318,678) (139,210)

Changes in operating liabilities: Net increase/(decrease) in deposits from customers 200,982 (115,931) Net decrease in deposits and placements from banks and other financial institutions (231,026) (92,026) Net decrease in financial assets sold under repurchase agreements (18,117) (5,833) Income tax paid (11,108) (11,196) Net (decrease)/increase in borrowings from central bank (30,850) 19,735 Net (decrease)/increase in other operating liabilities (40,105) 50,225

(130,224) (155,026)

Net cash used in operating activities (395,498) (257,059)

The accompanying notes form an integral part of these financial statements. 260 Consolidated Cash Flow Statement (continued) For the year ended 31 December 2018 (Expressed in millions of Renminbi, unless otherwise stated)

Note 2018 2017

Cash flows from investing activities: Proceeds from sale and redemption of investments 1,693,509 2,453,680 Proceeds from disposal of property and equipment, intangible assets and other long-term assets 2,028 3,427 Net payments for acquisition of subsidiaries and other business units — 330 Cash payment for purchase of investment securities (1,408,202) (2,322,906) Cash payment for purchase of property and equipment, intangible assets and other long-term assets (5,803) (10,244)

Net cash from investing activities 281,532 124,287

Cash flows from financing activities: Capital contribution from non-controlling interests to subsidiaries 181 — Proceeds from issue of debt securities 42(2) 1,167,503 885,225 Repayments of debt securities issued 42(2) (1,003,023) (788,740) Interest paid on debt securities issued 42(2) (19,305) (12,282) Dividends paid 42(2) (3,863) (10,934)

Net cash from financing activities 42(2) 141,493 73,269

Net increase/(decrease) in cash and cash equivalents 27,527 (59,503)

Cash and cash equivalents at 1 January 109,099 171,303 Effect of foreign exchange rate changes 1,400 (2,701)

Cash and cash equivalents at 31 December 42 138,026 109,099

The accompanying notes form an integral part of these financial statements. 261 Notes to the Consolidated Financial Statements (Expressed in millions of Renminbi, unless otherwise stated)

1 GENERAL INFORMATION

China Minsheng Banking Corp., Ltd. (the “Bank”) is a national joint-stock commercial bank established in the People’s Republic of China (“PRC”) on 7 February 1996 with the approval of the State Council of the PRC and the People’s Bank of China (“PBOC”).

The Bank obtained the financial service certificate No. B0009H111000001 as approved by the China Banking and Insurance Regulatory Commission (“CBIRC”), and the business licence as approved by the Beijing Administration for Industry and Commerce, the uniform social credit code is No. 91110000100018988F.

The Bank’s A Shares and H Shares are listed on the Shanghai Stock Exchange and the Stock Exchange of Hong Kong Limited and the stock codes are 600016 and 01988, respectively. The offshore preference shares are listed in Hong Kong Stock Exchange of Hong Kong Limited and the stock code is 04609.

For the purpose of these financial statements, mainland China refers to the PRC excluding the Hong Kong Special Administrative Region of the PRC (“Hong Kong”), the Macau Special Administrative Region of the PRC (“Macau”) and Taiwan. Overseas refers to Hong Kong, Macau, Taiwan and other countries and regions.

The Bank and its subsidiaries (collectively the “Group”) mainly provide corporate and personal banking, treasury business, finance leasing, fund and asset management, investment banking and other financial services in the PRC.

As at 31 December 2018, the Bank has 42 tier-one branches and 32 directly controlled subsidiaries.

2 BASIS OF PREPARATION AND ACCOUNTING POLICIES

The accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.

(1) Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board (“IASB”) and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The consolidated financial statements have been prepared on the historical cost basis except that: (i) financial assets at fair value through other comprehensive income are measured at fair value; (ii) financial assets and financial liabilities at fair value through profit or loss (including derivative instruments) are measured at fair value; and (iii) precious metals that acquired principally for trading purpose are measured at fair value.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Judgements that have a significant effect on the financial statements and estimates with a significant risk of material adjustments in the subsequent period are discussed in Note 4. The present financial statement should be read in conjunction with the audited financial statements for the year 2017 of the Group.

262 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

Changes in accounting policies

The IASB has issued the following amendments to IFRSs (including International Accounting Standards (“IASs”)) that are effective in 2018 and relevant to the Group’s operation:

• IFRS 15 “Revenue from contracts with customers”

• IFRS 9 “Financial instruments”

• Amendments to IFRS 2, Share-based payment “Classification and measurement of share-based payment transactions”

• Amendments to IAS 40, Investment property “Transfers of investment property”

• Annual Improvements to IFRSs 2014–2016 Cycle — “Amendments to IFRS 1, First-time adoption of International Financial Reporting Standards and Amendments to IAS 28, Investments in associates and joint ventures”

• Amendments to IFRS 4, Insurance contracts “Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts”

The principal effects of adopting these amended IFRSs are as follows:

IFRS 15 “Revenue from contracts with customers”

Under IFRS 15, revenue is recognised based on a single model that applies to contracts with customers. The model features the replacement of the previous “transfer of risk-reward” by the “transfer of control” as the criteria for revenue recognition. The standard contains a contract-based five-step analysis of transactions to determine whether, how much and when (at a point in time or over time) revenue is recognised. Under IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations, revenue is recognised in accordance with transactions distinguished from sales of goods, rendering of services and construction contracts.

IFRS 15 also introduces extensive qualitative and quantitative disclosure requirements which aim to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

The adoption will not have any material impact on the financial position and the financial result of the Group.

IFRS 9 “Financial instruments”

IFRS 9 Financial Instruments (“IFRS 9”) introduces new requirements for classification and measurement of financial assets, including the measurement of impairment for financial assets, hedge accounting and disclosure. The Group is required to adopt IFRS 9 from 1 January 2018 and the Group has applied the classification and measurement requirements of IFRS 9 retrospectively. The Group recognised any difference between the previous carrying amount under IAS 39 and the carrying amount at the beginning of the annual reporting period that includes the date of initial application (on 1 January 2018) in the opening retained earnings or reserves. Comparative information has not been restated. For the accounting policies regarding IAS 39, see Note 2 “Basis of preparation and accounting policies” to 2017 financial statements.

263 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

IFRS 9 “Financial instrument” (continued)

Classification and measurement

IFRS 9 contains three principal classification categories for financial assets: measured at (1) amortised cost, (2) fair value through profit or loss (FVTPL) and (3) fair value through other comprehensive income (FVOCI):

• The classification for debt instruments is determined based on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the asset. On initial recognition the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL. If a debt instrument is classified as FVOCI then interest revenue, impairment, foreign exchange gains/losses and gains/losses on disposal will be recognised in profit or loss.

• For equity securities, the classification is FVTPL regardless of the entity’s business model. The only exception is if the equity security is not held for trading and the entity irrevocably elects to designate that security as FVOCI. If an equity security is designated as FVOCI then only dividend income on that security will be recognised in profit or loss. Gains and losses on that security will be recognised in other comprehensive income without recycling.

Impairment

The new impairment model in IFRS 9 replaces the “incurred loss” model in IAS 39 with an “expected credit loss” model. Under the expected credit loss model, it will no longer be necessary for a loss event to occur before an impairment loss is recognised. Instead, an entity is required to recognise and measure either a 12-month expected credit loss or lifetime expected credit loss, depending on the asset and the facts and circumstances, which will result in an early recognition of credit losses.

Hedge accounting

IFRS 9 does not fundamentally change the requirements relating to measuring and recognising ineffectiveness under IAS 39. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting.

Disclosure

IFRS 9 will require extensive new disclosures, in particular about hedge accounting, credit risk and expected credit loss.

264 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

IFRS 9 “Financial instrument” (continued)

Transition

The Group is required to adopt IFRS 9 from 1 January 2018 and the Group has applied the classification and measurement requirements of IFRS 9 retrospectively. The Group recognised any difference between the previous carrying amount under IAS 39 and the carrying amount at the beginning of the annual reporting period that includes the date of initial application (on 1 January 2018) in the opening retained earnings or reserves.

The following financial assets has been reclassified and remeasured on transition to IFRS 9 on 1 January 2018.

IAS 39 IFRS 9 Financial instruments Classification Carrying amount Classification Carrying amount

Financial assets: Cash and balances with Amortised cost 442,938 Amortised cost 442,938 central banks (loans and receivables) Balances with banks and Amortised cost 218,462 Amortised cost 218,401 other financial institutions (loans and receivables) Financial assets at fair FVTPL (trading) 64,666 FVTPL (mandatory) 74,601 value through profit or loss FVTPL 9,935 FVTPL (designated) — (designated) Derivatives FVTPL 18,734 FVTPL (mandatory) 18,734 Financial assets held under Amortised cost 52,812 Amortised cost 52,687 resale agreements (loans and receivables) Interest receivable Amortised cost 39,664 Amortised cost 39,720 (loans and receivables) Loans and advances Amortised cost 2,729,788 Amortised cost 2,629,980 to customers (loans and FVOCI 89,022 receivables) Investment securities Amortised cost 974,163 Amortised cost 1,212,387 (loans and receivables) Amortised cost 708,244 FVOCI 345,207 (held-to-maturity securities) FVOCI (available 378,889 FVTPL (mandatory) 502,787 for sale) Long-term receivables Amortised cost 101,304 Amortised cost 100,919 (loans and receivables) Other assets Amortised cost 40,864 Amortised cost 40,916 (loans and receivables)

265 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

IFRS 9 “Financial instrument” (continued)

Reconciliation between the carrying amounts of the financial instruments presented and measured under IAS 39 and that of financial instruments measured under IFRS 9 on 1 January 2018 is as follows:

Carrying amount Carrying amount under IAS 39 as under IFRS 9 as at 31 December at 1 January Financial instruments Note 2017 Reclassification Remeasurement 2018

Financial assets measured at amortised cost Cash and balances with central bank Balance under IAS 39 and IFRS 9 442,938 442,938

Balances with banks and other financial institutions Balance under IAS 39 218,462 Remeasurement: provision for expected credit losses (61) Balance under IFRS 9 218,401

Financial assets held under resale agreements Balance under IAS 39 52,812 Remeasurement: provision for expected credit losses (125) Balance under IFRS 9 52,687

Interest receivable Balance under IAS 39 39,664 Less: to FVTPL (IFRS 9) (111) Add: from loans and receivables (IAS 39) 2 Add: from held-to-maturity securities (IAS 39) 4 Add: from available-for-sale securities (IAS 39) 161 Balance under IFRS 9 39,720

Loans and advances to customers Balance under IAS 39 2,729,788 Less: to FVOCI (IFRS 9) A (88,807) Remeasurement: provision for expected credit losses (11,001) Balance under IFRS 9 2,629,980

Long-term receivables Balance under IAS 39 101,304 Remeasurement: provision for expected credit losses (385) Balance under IFRS 9 100,919

266 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

IFRS 9 “Financial instrument” (continued)

Carrying amount Carrying amount under IAS 39 as under IFRS 9 as at 31 December at 1 January Financial instruments Note 2017 Reclassification Remeasurement 2018

Financial assets measured at amortised cost (continued) Financial invesments Balance under IAS 39 — Add: from held-to-maturity securities (IAS 39) 708,040 Remeasurement: provision for expected credit losses (88) Add: from loans and receivables (IAS 39) 497,456 Remeasurement: provision for expected credit losses (165) Add: from available-for-sale securities (IAS 39) C 7,259 Remeasurement: provision for expected credit losses (115) Balance under IFRS 9 1,212,387

Financial invesments: held-to- maturity securities Balance under IAS 39 708,244 Less: to interest receivable (4) Less: to amortised cost (IFRS 9) (708,040) Less: to FVTPL B (IFRS 9) — mandatory (200) Balance under IFRS 9 —

Financial invesments: loans and receivables Balance under IAS 39 974,163 Less: to interest receivable (2) Less: to amortised cost (IFRS 9) (497,456) Less: to FVOCI (IFRS 9) A (28,856) Less: to FVTPL B (IFRS 9) — mandatory (447,799) Less: to other assets (50) Balance under IFRS 9 —

Other assets Balance under IAS 39 40,864 Add: from loans and receivables (IAS 39) 50 Remeasurement: provision for expected credit losses 2 Balance under IFRS 9 40,916

Subtotal 5,308,239 (558,353) (11,938) 4,737,948

267 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

IFRS 9 “Financial instrument” (continued)

Carrying amount Carrying amount under IAS 39 as under IFRS 9 as at 31 December at 1 January Financial instruments Note 2017 Reclassification Remeasurement 2018

Financial assets at fair value through profit or loss Financial investments-at fair value through profit or loss Balance under IAS 39 74,601 Less: to FVOCI (IFRS 9) (914) Add: from interest receivable 111 Add: from loans and receivables (IAS 39) B 447,799 Remeasurement: from amortised cost to fair value (1,421) Remeasurement: reverse of impairment allowance under IAS 39 358 Add: from held-to-maturity securities (IAS 39) B 200 Add: from available-for-sale securities (IAS 39) B 56,623 Remeasurement: reverse of impairment allowance under IAS 39 1,109 Remeasurement: from amortised cost to fair value 31 Remeasurement: fair value change (1,109) Balance under IFRS 9 577,388

Derivatives Balance under IAS 39 and IFRS 9 18,734 18,734

Subtotal 93,335 503,819 (1,032) 596,122

268 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

IFRS 9 “Financial instrument” (continued) Carrying amount Carrying amount under IAS 39 as under IFRS 9 as at 31 December at 1 January Financial instruments Note 2017 Reclassification Remeasurement 2018

Financial assets at fair value through other comprehensive income Financial investments: at FVOCI (debt securities) Balance under IAS 39 — Add: from loans and advances to customers A 88,807 Remeasurement: reverse of impairment allowance under IAS 39 599 Remeasurement: from amortised cost to fair value (384) Add: from FVTPL 914 Add: from loans and receivables (IAS 39) A 28,856 Remeasurement: from amortised cost to fair value 432 Add: from available-for-sale securities (IAS 39) 314,691 Remeasurement: reverse of impairment allowance under IAS 39 303 Remeasurement: fair value change (144) Balance under IFRS 9 434,074

Financial investments: at FVOCI (equity securities) Balance under IAS 39 — Add: from available-for-sale securities (IAS 39) — designated D 155 Balance under IFRS 9 155

Financial investments: available-for- sale securities (IAS 39) Balance under IAS 39 378,889 Less: to interest receivable (161) Less: to amortised cost (IFRS 9) C (7,259) Less: to FVOCI (IFRS 9) — debt instruments (314,691) Less: to FVOCI (IFRS 9) — equity instruments D (155) Less: to FVTPL (IFRS 9) B (56,623) Balance under IFRS 9 —

Subtotal 378,889 54,534 806 434,229

Others (809) — (1,424) (2,233) Deferred income tax assets 29,162 — 3,402 32,564

Total 5,808,816 — (10,186) 5,798,630

269 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

IFRS 9 “Financial instrument” (continued)

The Group has adopted IFRS 9 from 1 January 2018. There were a net increase of RMB 1,413 million in other comprehensive income (after tax) and a net decrease of RMB 11,599 million in retained profits (after tax) arising from the new requirements on classification and measurement of financial assets listed above as compared with that when recognised under IAS 39.

A. Certain loans and advances to customers held by the Group, and certain debt instruments originally classified as loans and receivables were held within a business model whose objective on the transition date was to collect contractual cash flows and sell financial assets. In addition, their contractual cash flows were identified as solely payments of principal and interest on the principal amount outstanding. Therefore, these assets were classified as financial assets at FVOCI under IFRS 9.

B. Certain debt instruments originally classified as loans and receivables, held-to-maturity securities or available- for-sale securities, their contractual cash flows were not identified as solely payments of principal and interest on the principal outstanding. Therefore, these assets were classified as financial assets at FVTPL under IFRS 9. The reclassified and remeasured financial assets include certain non-trading equity investments (RMB 4,622 million) which the Group did not choose to designate as at FVOCI on the standards transition date.

C. Certain debt instruments originally classified as available-for-sale securities were held within a business model whose objective on the standards transition date was to collect contractual cash flows. In addition, their contractual cash flows were identified as solely payments of principal and interest on the principal outstanding. Therefore, these assets were classified as financial assets measured at amortised cost under IFRS 9 and their fair value as at 31 December 2018 was RMB 5,988 million. Assuming that these financial assets were not reclassified upon transition to IFRS 9, any loss arising from changes in their fair value during the current period that would have been recognised in other comprehensive income was RMB 105 million.

D. The reclassified and remeasured financial assets include certain non-trading equity investments which the Group chose irrevocably to designate as at FVOCI on the standards transition date.

The following table reconciles the closing impairment allowance under IAS 39 to ECL allowance determined in accordance with IFRS 9 on the initial application date:

Impairment allowance Impairment under IAS 39/ allowance contingent under liabilities as at IFRS 9 as at 31 December 2017 Reclassification Remeasurement 1 January 2018

Loans and receivables (IAS 39)/ Financial assets measured at amortised cost (IFRS 9) Balances and placements with banks and other financial institutions (95) — (61) (156) Financial assets held under resale agreements (5) — (125) (130) Loans and advances to customers (73,920) — (11,214) (85,134) Long-term receivables (3,426) — (385) (3,811) Financial investments (1,908) — (165) (2,073) Other assets (1,110) — 2 (1,108)

270 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

IFRS 9 “Financial instrument” (continued) Impairment allowance Impairment under IAS 39/ allowance contingent under liabilities as at IFRS 9 as at 31 December 2017 Reclassification Remeasurement 1 January 2018

Loans and advances (IAS 39)/ Financial assets at fair value through other comprehensive income (IFRS 9) Loans and advances to customers (599) — (40) (639) Financial investments — — (288) (288)

Loans and advances (IAS 39)/ Financial assets at fair value through profit or loss (IFRS 9) Financial investments (358) 358 — —

Held-to-maturity securities (IAS 39)/ Financial assets measured at amortised cost (IFRS 9) Financial investments (62) — (88) (150)

Available-for-sale securities (IAS 39)/ Financial assets measured at amortised cost (IFRS 9) Financial investments (15) — (115) (130)

Available-for-sale securities (IAS 39)/ Financial assets at fair value through other comprehensive income (IFRS 9) Financial investments (303) — (156) (459)

Available-for-sale securities (IAS 39)/ Financial assets at fair value through profit or loss (IFRS 9) Financial investments (1,109) 1,109 — —

Credit commitments and financial guarantee contracts Credit commitments (809) — (1,424) (2,233)

Total (83,719) 1,467 (14,059) (96,311)

271 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

Amendments to IFRS 2, Share-based payment “Classification and measurement of share-based payment transactions”

The amendments clarify the accounting for the following classification and measurement issues under IFRS 2:

• Measurement of cash-settled share-based payments

The amendments clarify that the fair value of liabilities for cash-settled share-based payments should be measured using the same approach as for equity-settled share-based payments — i.e. using the modified grant date method.

• Classification of share-based payments settled net of tax withholdings

The amendments introduce an exception so that a share-based payment transaction with net settlement feature for withholding an amount to cover the employee’s tax obligations is classified as equity-settled in its entirety when certain conditions are met, even though the entity is then required to transfer cash (or other assets) to the tax authority to settle the employee’s tax obligation.

• Accounting for a modification of a share-based payment from cash-settled to equity-settled

The amendments clarify that on such a modification the liability for the original cash-settled share-based payment is derecognised and the equity-settled share-based payment is measured at its fair value and recognised to the extent that the goods or services have been received up to that date.

Any difference between the carrying amount of the liability derecognised and the amount recognised in equity at the modification date is recognised in profit or loss immediately.

The amendments are expected to have no material impact on financial position and financial performance.

Amendments to IAS 40, Investment property “Transfers of investment property”

The amendments provide guidance on deciding when there is a change in use to transfer a property to or from investment property. The amendments clarify that a change in use occurs when the property meets or ceases to meet the definition of investment property and there is evidence of the change in use.

The amendments also re-characterise the list of evidence provided in the standard as a non-exhaustive list of examples i.e. other forms of evidence may support a transfer.

The amendments are expected to have no material impact on financial position and financial performance.

Annual Improvements to IFRSs 2014-2016 Cycle — Amendments to IFRS 1, First-time adoption of International Financial Reporting Standards and Amendments to IAS 28, Investments in associates and joint ventures

The amendments to IFRS 1 delete the short-term exemptions for first-time adopters that are already out-of-date.

The amendments to IAS 28 clarify that:

• a venture capital organisation, or other qualifying entity, may elect to measure its investments in an associate or joint ventures at fair value through profit or loss on an investment-by-investment basis; and

• a non-investment entity investor may elect to retain the fair value accounting applied by its investment entity associate or joint venture and this election can be made separately for each investment entity associate or joint venture.

The annual improvements are expected to have no material impact on financial position and financial performance.

272 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(1) Basis of preparation (continued)

Amendments to IFRS 4, Insurance contracts “Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts”

The amendments address concerns arising from the different effective dates of IFRS 9 and the new insurance contracts standard, IFRS 17. The amendments introduce the following two approaches:

• Deferral approach—Temporary exemption from IFRS 9

Companies whose activities are predominantly connected with insurance may choose to defer the application of IFRS 9 until 2021(the effective date of IFRS 17).

• Overlay approach

All companies that issue insurance contracts may choose to recognise in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is applied.

The amendments are expected to have no material impact on financial position and financial performance.

Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended 31 December 2018

Up to the date of issue of the financial statements, the IASB has issued the following amendments, new standards and interpretations which are not yet effective for the year ended 31 December 2018 and which have not been adopted in these financial statements.

Effective for accounting periods Standard beginning on or after

IFRS 16, Leases 1 January 2019 IFRIC 23, Uncertainty over income tax treatments 1 January 2019 Amendments to IFRS 9, Prepayment features with negative compensation and modifications of financial liabilities 1 January 2019 Amendments to IAS 28, Long-term interests in associates and joint ventures 1 January 2019 Annual Improvements to IFRSs 2015-2017 Cycle 1 January 2019 Amendments to IAS 19, Plan amendment, curtailment or settlement 1 January 2019 Amendments to IFRS 3, Definition of a business 1 January 2020 Amendments to IAS 1 and IAS 8, Definition of material 1 January 2020 IFRS 17, Insurance contracts 1 January 2021

So far the Group has concluded that the adoption of above standards is unlikely to have a significant impact on its operating results and financial position.

273 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(2) Consolidated financial statements

The Group’s consolidated financial statements comprise the Bank, its subsidiaries and structured entities controlled by the Group.

The Bank controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Bank has power, only substantive rights (held by the Bank and other parties) are considered.

(i) Subsidiaries

For the separate financial statements of the Bank, investments in subsidiaries are accounted for at cost. At initial recognition, investment in subsidiaries is measured at: the cost of acquisition determined at the acquisition date when the subsidiaries are acquired through business combination; or the cost of capital injected into the subsidiaries set up by the Group. Impairment losses on investments in subsidiaries are accounted for in accordance with the accounting policies as set out in Note 2(12).

The results and affairs of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. When preparing the consolidated financial statements, the Bank shall make necessary adjustments on the accounting period and accounting policies of subsidiaries to comply with those of the Bank.

Intragroup balances and transactions, and any profits or losses arising from intragroup transactions are eliminated in full in preparing the consolidated financial statements.

The portion of a subsidiary’s net assets that is attributable to equity interests that are not owned by the Bank, whether directly or indirectly through subsidiaries, is treated as non-controlling interests and presented as “non-controlling interests” in the consolidated statement of financial position within total equity. The portion of net profit or loss and other comprehensive income of subsidiaries for the year attributable to non-controlling interests is separately presented in the consolidated statement of comprehensive income as a component of the Group’s net profit.

(ii) Structured entities

Structured entities are entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the entities, for example when any voting rights relate to administrative tasks only, and key activities are directed by contractual agreement. Involvement with consolidated and unconsolidated structured entities is disclosed in Notes 45 and 46.

(3) Foreign currency translation

These financial statements are presented in RMB, unless otherwise stated, rounded to the nearest million, which is the functional currency of domestic branches and subsidiaries of the Group. The functional currencies of overseas branches and subsidiaries are determined in accordance with the primary economic environment in which they operate.

Transactions in foreign currencies are translated into the respective functional currencies of the operations at the spot exchange rates at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated into the functional currency at the spot exchange rates at that date. The resulting exchange differences are recognised in profit or loss. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated into functional currency using the spot exchange rates at the dates of the transactions. Non-monetary items denominated in foreign currencies that are measured at fair value are translated using the spot exchange rates at the dates the fair values are determined; The exchange differences are recognised in profit or loss or in other comprehensive income, depending on the nature of non-monetary items.

274 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(3) Foreign currency translation (continued)

Foreign currency financial statements of overseas entities are translated into RMB for the preparation of consolidated financial statements. At the end of each reporting period, the assets and liabilities in the financial statements denominated in foreign currencies are translated into RMB at the spot exchange rates ruling at that date. The income and expenses of foreign operations are translated into RMB at the spot exchange rates or the rates that approximate the spot exchange rates on the transaction dates. Foreign exchange differences arising from foreign operations are recognised as “exchange reserve” in the shareholder’s equity in the statement of financial position.

The effect of exchange rate changes on cash is presented separately in the statement of cash flows.

(4) Income recognition

Revenue is the gross inflow of economic benefits arising in the course of the Group’s ordinary activities when the inflows result in increases in shareholders’ equity and are unrelated to contributions from shareholders. The Group fulfils its compliance obligations stated in the contract, that is, when the client takes control of the relevant goods or services, the revenue is recognized.

(i) Interest income

For all financial instruments measured at amortised cost and interest-generating financial instruments classified as financial assets measured at FVOCI, interest income is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument, where appropriate, to the book value of the financial asset, or the amortised cost of financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not expected credit losses.

Interest income is calculated by applying the effective interest rate to the book value of financial assets and is included in interest income, except for:

(a) For purchased or originated credit-impaired financial assets, whose interest income is calculated, since initial recognition, by applying the credit adjusted effective interest rate to their amortised cost;

(b) Financial assets that are not purchased or originated credit-impaired but have subsequently become credit- impaired, whose interest income is calculated by applying the effective interest rate to their amortised cost (i.e. net of the expected credit loss provision). If, in a subsequent period, the financial assets improve their qualities so that they are no longer credit-impaired and the improvement in credit quality is related objectively to a certain event occurring after the application of the above-mentioned rules, then the interest income is calculated by applying the effective interest rate to their book value.

(ii) Fee and commission income

The Group earns fee and commission income from a diverse range of services it provides to its customers. The fee and commission income recognised by the Group reflects the amount of consideration to which the Group expects to be entitled in exchange for transferring promised services to customers, and income is recognised when its performance obligation in contracts is satisfied.

275 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(4) Income recognition (continued)

(ii) Fee and commission income (continued)

(a) The Group recognises income over time by measuring the progress towards the complete satisfaction of a performance obligation, if one of the following criteria is met:

— The customer simultaneously receives and consumes the benefits provided by the Group’s performance as the Group performs;

— The customer controls the service provided by the Group in the course of performance;

— The Group does not provide service with an alternative use to the Group, and the Group has an enforceable right to payment for performance completed to date.

(b) In other cases, the Group recognises revenue at a point in time at which a customer obtains control of the promised services.

(5) Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

(i) Recognition and initial measurement of financial instrument

A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of a financial instrument.

A financial assets and financial liabilities is measured initially at fair value. For financial assets and financial liabilities at fair value through profit or loss, any related directly attributable transaction costs are charged to profit or loss; for other categories of financial assets and financial liabilities, any related directly attributable transaction costs are included in their initial costs.

(ii) Classification and subsequent measurement of financial assets

a Classification of financial assets

The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. On initial recognition, a financial asset is classified as measured at amortised cost, at fair value through other comprehensive income (“FVOCI”), or at fair value through profit or loss (“FVTPL”).

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

— It is held within a business model whose objective is to hold assets to collect contractual cash flows; and

— Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

276 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(5) Financial instruments (continued)

(ii) Classification and subsequent measurement of financial assets (continued)

a Classification of financial assets (continued)

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

— It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

— Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The business model refers to how the Group manages its financial assets in order to generate cash flows. That is, the Group’s business model determines whether cash flows will result from collecting contractual cash flows, selling financial assets or both. The Group determines the business model for managing the financial assets according to the facts and based on the specific business objective for managing the financial assets determined by the Group’s key management personnel.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin. The Group also assesses whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.

b Subsequent measurement of financial assets

Financial assets at FVTPL

These financial assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss unless the financial assets are part of a hedging relationship.

Financial assets at amortised cost

These assets are subsequently measured at amortised cost using the effective interest method. A gain or loss on a financial asset that is measured at amortised cost and is not part of a hedging relationship shall be recognised in profit or loss when the financial asset is derecognised, through the amortisation process or in order to recognise impairment gains or losses.

277 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(5) Financial instruments (continued)

(ii) Classification and subsequent measurement of financial assets (continued)

b Subsequent measurement of financial assets (continued)

Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, impairment and foreign exchange gains and losses are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to retained earnings.

(iii) Classification and subsequent measurement of financial liabilities

Financial liabilities are classified as measured at FVTPL, financial guarantee liabilities or other financial liabilities.

a Financial liabilities at FVTPL

A financial liability is classified as at FVTPL if it is classified as held-for-trading (including derivative financial liability) or it is designated as such on initial recognition.

Financial liabilities at FVTPL are subsequently measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss, unless the financial liabilities are part of a hedging relationship.

b Financial guarantee liabilities

Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Financial guarantee liabilities are recognised initially at their fair value, and the initial fair value is amortised over the life of the financial guarantee. The financial guarantee liability is subsequently carried at the higher of this amortised amount and the amount of the loss allowance determined in accordance with impairment policies of financial instruments (see Note 2(5)(v)).

c Other financial liabilities

Other financial liabilities are subsequently measured at amortised cost using the effective interest method.

278 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(5) Financial instruments (continued)

(iv) Derecognition of financial assets and financial liabilities

The Group derecognises a financial asset if the part being considered for derecognition meets one of the following conditions: (i) the contractual rights to receive the cash flows from the financial asset expire; or (ii) the financial asset has been transferred and the Group transfers substantially all of the risks and rewards of ownership of the financial asset; or (iii) the financial asset has been transferred, although the Group neither transfers nor retains substantially all of the risks and rewards of ownership of the financial asset, it does not retain control over the transferred asset.

Where a transfer of a financial asset in its entirety meets the criteria for derecognition, the difference between the two amounts below is recognised in profit or loss:

— The carrying amount of the financial asset transferred measured at the date of derecognition;

— The sum of the consideration received from the transfer and, when the transferred financial asset is a debt investment at FVOCI, any cumulative gain or loss that has been recognised directly in other comprehensive income for the part derecognised.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but retains control, the Group continues to recognise the financial asset to the extent of its continuing involvement in the financial asset. If the Group has not retained control, it derecognises the financial asset and recognises separately as assets or liabilities any rights and obligations created or retained in the transfer.

The financial liability is derecognised only when: (i) the underlying present obligation specified in the contracts is discharged, cancelled or expired, or (ii) an agreement between the Group and an existing lender to replace the original financial liability with a new financial liability with substantially different terms, or a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

(v) Impairment of financial assets

The Group recognises loss allowances for expected credit loss (ECL) on:

— Financial assets measured at amortised cost;

— Debt investments measured at FVOCI;

— Loan commitments and financial guarantee contracts issued, which are not measured at FVTPL.

Financial assets measured at fair value, including debt investments or equity securities at FVPL, equity securities designated at FVOCI and derivative financial assets, are not subject to the ECL assessment.

a Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

The maximum period considered when estimating ECLs is the maximum contractual period (including extension options) over which the Group is exposed to credit risk.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

279 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(5) Financial instruments (continued)

(v) Impairment of financial assets (continued)

a Measurement of ECLs (continued)

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the balance sheet date (or a shorter period if the expected life of the instrument is less than 12 months).

The Group applies a ‘three-stage model’ for measuring ECL. For the measurement and segmentation of ECL of financial instruments of the Group, see Note 3 (2) Credit risk.

b Presentation of allowance for ECL

ECLs are remeasured at each balance sheet date to reflect changes in the financial instrument’s credit risk since initial recognition. Any change in the ECL amount is recognised as an impairment gain or loss in profit or loss. The Group recognises an impairment gain or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for debt investments that are measured at FVOCI, for which the loss allowance is recognised in other comprehensive income. For the loan commitments and financial guarantee contracts issued, which are not measured at FVTPL, the Group recognises the loss allowance in provisions (credit loss of off-balance-sheet assets).

c Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. A write-off constitutes a derecognition event. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

Subsequent recoveries of an asset that was previously written off are recognised as a reversal of impairment in profit or loss in the period in which the recovery occurs.

(vi) Fair value measurement

If there is an active market for financial instruments, the fair value of financial instruments is based on quoted market prices without any deduction for transaction costs that may occur on sale or other disposal. The appropriate quoted price in an active market for a financial asset held or liability to be issued is usually the current bid price and, for an asset to be acquired or liability held, the asking price. Quoted prices from an active market are prices that are readily and regularly available from an exchange, dealer, broker, industry group or pricing service agency, etc, and represent prices of actual and regularly occurring market transactions on an arm’s length basis.

If a quoted market price is not available, the fair value of the financial instruments is estimated using valuation techniques. Valuation techniques applied include recent arm’s length market transactions between knowledgeable and willing parties, reference to the fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. The Group selects valuation techniques that are commonly accepted by market participants for pricing the instruments and these techniques have been demonstrated to provide reliable estimates of prices obtained in actual market transactions. Periodically, the Group reviews the valuation techniques and tests them for validity.

280 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(5) Financial instruments (continued)

(vii) Offsetting

Financial assets and financial liabilities are generally presented separately in the balance sheet, and are not offset. However, a financial asset and a financial liability are offset and the net amount is presented in the balance sheet when both of the following conditions are satisfied:

— The Group currently has a legally enforceable right to set off the recognised amounts;

— The Group intends either to settle on a net basis, or to realise the financial asset and settle the financial liability simultaneously.

(viii) Derivative financial instruments and embedded derivative financial instruments

The Group uses derivative financial instruments such as forward, futures, swap and option contracts to hedge its risks associated with foreign currency and interest rate fluctuation respectively. A derivative financial instrument has all three of the following characteristics:

— Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable;

— It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors;

— It is settled at a future date.

Derivatives are recognised at fair value upon initial recognition. The positive fair value is recognised as an asset while the negative fair value is recognised as a liability. The gain or loss on re-measurement to fair value is recognised in profit or loss.

An embedded derivative financial instrument is a component of a hybrid contract that includes a non-derivative principal contract (the “host contract”), and embedded derivative financial instruments and the principal contract comprise a hybrid contract. The derivative financial instrument causes adjustment to some or all of the cash flows of the principal contract according to changes in specified interest rate, financial instrument price, foreign exchange rate, price or interest rate index, credit rating, credit index, or other similar variables.

If the host contract in a hybrid contract is classified as an asset according to the financial instruments standard, the Group will apply relevant financial asset classification provisions to the hybrid contract as a whole;

The hybrid contract will be separated from the host contract and treated as a separate derivative financial instrument if the host contract in a hybrid contract is not classified as an asset according to the financial instruments standard, and meets the following conditions: (i) the economic characteristics and risks of the embedded derivative financial instrument are not closely related to the principal contract; (ii) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and (iii) the hybrid instruments are not measured at fair value through profit or loss;

Where a hybrid contract includes one or more embedded derivative financial instruments and the host contract in the hybrid contract is not classified as an asset according to the financial instruments standard, the Group classifies the hybrid contract as a financial instrument measured at FVTPL except for the following cases: (i) the embedded derivative financial instruments do not significantly modify the cash flow of the hybrid contract; (ii) when determining for the first time whether such hybrid contracts require separation, it is clear without analysis that the embedded derivative financial instruments should not be separated from the contracts.

281 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(5) Financial instruments (continued)

(ix) Hedge accounting

Hedge accounting is a method which recognises in profit or loss the offsetting effect of changes in the fair value of the hedging instrument and the hedged item in the same accounting period(s).

Hedged items are the items that expose the Group to risks of changes in fair value or future cash flows and that are designated as being hedged.

A hedging instrument is a designated derivative whose changes in fair value or cash flows are expected to offset changes in the fair value or cash flows of the hedged item.

The hedge is assessed by the Group for effectiveness on an ongoing basis and judged whether it was highly effective throughout the accounting periods for which the hedging relationship was designated. Group only adopts cash flow hedging accounting.

A cash flow hedge is a hedge of the exposure to variability in cash flows. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in other comprehensive income as a separate component. The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in profit or loss.

When the hedged cash flow affects profit or loss, the gain or loss on the hedging instrument recognised directly in other comprehensive income from the period when the hedge was effective is recycled in the corresponding income or expense line of the statement of profit or loss. When a hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting, the Group will discontinue the hedge accounting treatments prospectively. In this case, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income until the hedged forecast transaction ultimately occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately transferred to profit or loss.

(x) Asset-backed securities

The Group securitises various corporate loans, which generally results in the sale of these assets to special purpose entity, which, in turn issue securities to investors. Interests in the securitised financial assets may be retained in the form of senior or subordinated tranches, or other residual interests (retained interests). Retained interests are carried at fair value on inception date on the Group’s statement of financial position. Gains or losses on asset-backed securities depend in part on the carrying amount of the transferred financial assets, allocated between the financial assets derecognised and the retained interests based on their relative fair values at the date of the transfer. Gains or losses on asset-backed securities are recorded in other operating income.

In applying its policies on securitised financial assets, the Group has considered both the degree of transfer of risks and rewards on assets transferred and the degree of control exercised by the Group over the financial assets:

— when the Group transfers substantially all the risks and rewards of ownership of the financial assets, the Group shall derecognise the financial assets;

— when the Group retains substantially all the risks and rewards of ownership of the financial assets, the Group shall continue to recognise the financial assets; and

— when the Group neither transfers nor retains substantially all the risk and rewards of ownership of the financial assets, the Group would determine whether it has retained control of the financial assets. If the Group has not retained control, it shall derecognise the financial assets and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer. If the Group has retained control, it continues to recognise the financial asset to the extent of its continuing involvement in the financial asset.

282 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(5) Financial instruments (continued)

(xi) Preference share

Such preference shares or their components are initially recognised as financial assets, financial liabilities or equity instruments according to the terms and the economic substance combined with the definition of financial assets, financial liabilities and equity instruments.

When the issued preference shares contain equity and liability components, the Group follows the same accounting policy as for convertible bonds with equity components. For the issued preference shares which do not contain equity component, the Group follows the accounting policy as accounting for the convertible bonds only with liability component.

For the issued preference shares that should be classified as equity instruments, will be recognised as equity in actual amount received. Dividends payables are recognised as distribution of profits. Redemption before maturity will write down equity as redemption price.

(6) Precious metals

Precious metals comprise gold and other precious metals. Precious metals that are acquired by the Group principally for trading purpose are initially recognised at fair value and re-measured at fair value with changes in fair value included in “net trading gain/(loss)” in the statement of comprehensive income. Precious metals that are not acquired by the Group principally for trading purpose are carried at lower of cost and net realisable value.

(7) Financial assets held under resale agreements and financial assets sold under repurchase agreements

Financial assets held under resale agreements are transactions where the Group acquires financial assets which will be resold at a predetermined price at a future date under resale agreements. Financial assets sold under repurchase agreements are transactions where the Group sells financial assets which will be repurchased at a predetermined price at a future date under repurchase agreements.

The cash advanced or received is recognised as amounts held under resale or sold under repurchase agreements in the statement of financial position. Assets held under resale agreements are not recognised. Assets sold under repurchase agreements continue to be recognised in the statement of financial position.

The difference between the purchase and resale consideration, and that between the sale and repurchase consideration, is amortised over the period of the respective transaction using the effective interest method and is included in interest income and interest expenses respectively.

(8) Repossessed assets

In the recovery of impaired loans and advances, the Group may take possession of assets held as collateral through court proceedings or voluntary delivery of possession by the borrowers. Repossessed assets are recognised and reported in “other assets” in the statement of financial position when the Group intends to achieve an orderly realisation of the impaired assets and the Group is no longer seeking repayment from the borrower.

Repossessed assets are initially recognised at fair value plus related costs when they are obtained as compensation for loan principal and interest. Subsequently, the repossessed collateral assets are measured at the lower of their carrying amount and net recoverable amount. Repossessed assets do not carry depreciation and amortisation. The impairment losses of initial measurement and subsequent revaluation are charged to the income statement.

283 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(9) Investment properties

Investment properties are land and/or buildings which are owned or held under a leasehold interest to earn rental income and/or for capital appreciation. These include land held for a currently undetermined future use and property that is being constructed or developed for future use as investment property. Investment properties are measured initially at cost. Subsequent costs are recognised in the carrying amount of the item if the recognition criteria are satisfied. Expenditures related to ordinary maintenance are recognised in profit or loss.

The Group adopts the cost model for subsequent measurement of the investment properties. Depreciation is calculated to write off to profit or loss the cost of investment properties, less their estimated residual value, if any, using the straight line method over their estimated useful lives. The estimated useful lives, the estimated net residual values expressed as a percentage of cost and the annual depreciation rates of the investment properties are as follows:

Estimated Estimated net Annual depreciation useful lives residual value rate

Buildings 40 years 5% 2.38%

When an investment property is transferred to an owner-occupied property, it is reclassified as property at its carrying amount at the transfer date. When an owner-occupied property is transferred to earn rentals or for capital appreciation, the property is reclassified as investment property at its carrying amount at the transfer date.

At the end of each reporting period, the Group analyses the estimated useful lives, net residual value and depreciation method of the investment property, and adjusts if appropriate.

An investment property is derecognised on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Gains or losses arising from the retirements or disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the assets, and is recognised in profit or loss in the period of the retirement or disposal.

(10) Property and equipment

Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of an asset.

The cost of replacing a component of an item of property or equipment is recognised in the carrying amount of the item, if it is probable that the future economic benefits associated with the item will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. Expenditures relating to ordinary maintenance of property and equipment are recognised in profit or loss.

Depreciation is amortised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment. The estimated useful lives, the estimated net residual values expressed as a percentage of cost and the annual depreciation rates of the investment properties are as follows:

Estimated Estimated net Annual depreciation useful lives residual value rates

Buildings 15–40 years 5% 2.38%–6.33% Leasehold improvement 5–10 years 0% 10%–20% Office equipment 3–10 years 5% 9.5%–31.67% Transportation equipment 5–24 years 5% 3.96%–19%

No depreciation is provided on construction work in progress.

At the end of each reporting period, the Group analyses the estimated useful lives, net residual value and depreciation method of property and equipment, and adjusts if appropriate.

284 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(10) Property and equipment (continued)

Impairment losses on property and equipment are accounted for in accordance with the accounting policies as set out in Note 2(12).

Gains or losses arising from the retirement or disposal of property and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the assets are recognised in profit or loss on the date of retirement or disposal.

(11) Intangible assets

Intangible assets include land use rights and computer software, and they are measured at cost.

The cost less estimated net residual values of the intangible assets is amortised in profit or loss on a straight-line basis over their useful lives. Impaired intangible assets are amortised net of accumulated impairment losses.

If purchase costs of land use rights and the buildings located thereon cannot be reliably allocated between the land use rights and the buildings, all of the purchase costs are recognised as properties.

At the end of each reporting period, the Group analyses the estimated useful lives and the amortisation method of the intangible assets, and adjusts if appropriate.

(12) Impairment of non-financial assets

At the end of each reporting period, the Group assesses whether there is any indication that a non-financial asset may be impaired. If any indication exists that an asset may be impaired, the Group estimates the recoverable amount of the asset.

If there is any indication that an asset may be impaired and it is not possible to estimate the recoverable amount of an individual asset, the Group determines the recoverable amount of the cash-generating unit (“CGU”) to which the asset belongs.

CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash flows from other assets or groups of assets.

The recoverable amount of an asset (or CGU, group of CGUs) is the higher of its fair value less costs to sell and the present value of the expected future cash flows. The Group considers all relevant factors in estimating the present value of future cash flows, such as the expected future cash flows, the useful life and the discount rate.

(i) Impairment loss

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is recognised as an impairment loss and charged to the profit or loss.

For a CGU or a group of CGUs, the amount of impairment loss firstly reduces the carrying amount of any goodwill allocated to the CGU or group of CGUs, and then reduces the carrying amount of other assets (other than goodwill) within the CGU or group of CGUs, pro rata on the basis of the carrying amount of each asset.

(ii) Reversing an impairment loss

If, in a subsequent period, the amount of impairment loss of the non-financial asset except for goodwill decreases and the decrease can be linked objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the profit or loss. A reversal of impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior periods.

An impairment loss in respect of goodwill is not reversed.

285 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(13) Income tax

Current income tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantially enacted at the end of each reporting period, and any adjustment to tax payable in respect of previous periods.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax also arises from unused tax losses and unused tax credits. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

At the end of each reporting period, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled according to the requirements of tax laws. The Group also considers the possibility of realisation and the settlement of deferred tax assets and deferred tax liabilities in the calculation.

Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities if the Group has the legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity. Otherwise, the balances of deferred tax assets and deferred tax liabilities, and movements therein, are presented separately from each other and are not offset.

Current income tax and movements in deferred tax balances are recognised in profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

(14) Employee benefits

(i) Short-term employee benefits

In the reporting period in which an employee has rendered services, the Group recognises the short-term employee benefits payable for those services as a liability with a corresponding increase in the expenses in the consolidated statement of profit or loss. Short-term employee benefits include salaries, bonuses, allowance, staff welfare, medical insurance, employment injury insurance, maternity insurance, housing funds as well as labour union fee and staff and workers’ education fee.

(ii) Post-employment benefits-defined contribution plans

The Group’s post-employment benefits are primarily the payments for basic pension fund and unemployment insurance related to government mandated social welfare programs, as well as the annuity scheme established. All these post-employment benefits are defined contribution plans, under which, the Group makes fixed contributions into a separate fund and will have no legal or constructive obligation to make further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee services in the current and prior periods.

Contributions to the post-employment benefits plans are recognised in the consolidated statement of profit or loss for the period in which the related payment obligation is incurred.

(15) Provisions

A provision is recognised in the statement of financial position if, as the result of a past event, the Group has a present legal or constructive obligation that can be reliably estimated and it is probable that an outflow of economic benefits will be required to settle the obligation. Where the effect of time value of money is material, provisions are determined by discounting the expected future cash flows.

286 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(16) Leases

A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee, irrespective of whether the legal title to the asset is eventually transferred or not. An operating lease is a lease other than a finance lease.

(i) Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss, using the straight-line method, over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

(ii) Assets leased out under operating leases

Fixed assets leased out under operating leases, except for investment properties (see Note 2(9)), are depreciated in accordance with the Group’s depreciation policies described in Note 2(10). Impairment losses are recognised in accordance with the accounting policy described in Note 2(12). Income derived from operating leases is recognised in profit or loss using the straight-line method over the lease term. If initial direct costs incurred in respect of the assets leased out are material, the costs are initially capitalised and subsequently amortised in profit or loss over the lease term on the same basis as the lease income. Otherwise, the costs are charged to profit or loss immediately.

(iii) Finance leases

When the Group is a lessor under financial lease, at the leasing commencement date, the minimum lease payments receivables and initial direct costs are recognised as finance lease receivables and any unguaranteed residual value is recognised at the same time. The difference between the sum of minimum lease payments receivables, initial direct costs, the unguaranteed residual value and their present value is accounted for as unearned finance income.

The unearned finance income is amortised using the effective interest method over the lease period.

Impairment losses on lease receivables are accounted for in accordance with the accounting policies set out in Note 2(5)(v).

(17) Contingent liabilities

A potential obligation arising from a past transaction or event whose existence can only be confirmed by the occurrence or non-occurrence of future uncertain events; or a present obligation that arises from past transactions or events where it is not probable that an outflow of economic benefits is required to settle the obligation or the amount of the obligation cannot be measured reliably, is disclosed as a contingent liability unless the probability of outflow of economic benefit is remote.

Contingent liabilities which are not recognised as a liability are expected to be disclosed in the notes only. If the situation changes, the contingent liabilities are recognised as liability when it is probable that an outflow of economic resources will be required and the amount of obligation can be measured reliably.

(18) Fiduciary activities

The Group’s fiduciary business refers to the management of assets for customers in accordance with custody agreements signed by the Group and securities investment funds, insurance companies, annuity plans and other organisations. The Group fulfils its fiduciary duty and receives relevant fees in accordance with these agreements, and does not take up any risks and rewards related to the assets under custody, which are recorded as off-balance sheet items.

287 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(18) Fiduciary activities (continued)

The Group conducts entrusted lending business, whereby it enters into entrusted loan agreements with customers. Under the terms of these agreements, the customers provide funding (the “entrusted funds”) to the Group, and the Group grants loans to third parties (the “entrusted loans”) according to the instructions of the customers. As the Group does not assume the risks and rewards of the entrusted loans and the corresponding entrusted funds, entrusted loans and funds are recorded as off-balance sheet items at their principal amounts and no impairment assessments are made for these entrusted loans.

(19) Profit distribution

Proposed dividends which are declared and approved after the end of each reporting period are not recognised as a liability in the statement of financial position and are instead disclosed as a subsequent event after the end of each reporting period in the notes to the financial statements. Dividends payable are recognised as liabilities in the period in which they are approved.

(20) Cash and cash equivalents

Cash and cash equivalents include cash at bank and on hand, unrestricted balances held with central banks and highly liquid financial assets with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value.

(21) Related parties

(i) A person, or a close member of that person’s family, is related to the Group if that person:

a has control or joint control over the Group;

b has significant influence over the Group; or

c is a member of the key management personnel of the Group.

(ii) An entity is related to the Group if any of the following conditions applies:

a The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

b One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

c Both entities are joint ventures of the same third party;

d One entity is a joint venture of a third entity and the other entity is an associate of the third entity;

e The entity is controlled or jointly controlled by a person identified in (i);

f A person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

288 2 BASIS OF PREPARATION AND ACCOUNTING POLICIES (CONTINUED)

(22) Operating segment

The Group determines its operating segments on the basis of its internal organisational structure, management requirements and internal reporting practices.

An operating segment is a component of the Group that meets all the following requirements: (i) it engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses relating to transactions with other components of the Group; (ii) its operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and (iii) separate financial information is available. The operating segments that meet the specified criteria have been aggregated, and the operating segment that meets quantitative thresholds have been reported separately.

The reports on an operating segment are consistent with those internal reports submitted to the chief operating decision maker.

3 FINANCIAL RISK MANAGEMENT

(1) Financial risk management overview

As per the comprehensive risk management framework of COSO and the comprehensive risk management guidelines of CBRIC, risk management includes identification, measurement, assessment, monitoring, reporting, control and mitigation of risks. The core characteristic of the financial business is taking risk; risks are inevitable in business. The Group’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects of risks borne by the Group on its financial performance.

As at 31 December 2018, the Group provides commercial banking, leasing, fund raising and sales and other financial services through the Bank and its subsidiaries, Minsheng Financial Leasing Co., Ltd. (“Minsheng Financial Leasing”), Minsheng Royal Fund Management Co., Ltd. (“Minsheng Royal Fund”) and CMBC International Holding Ltd. (“CMBC International”), and 29 Rural banks. Its subsidiaries as separate entities, are responsible for financial risk management in their respective businesses. The financial risk arising from commercial banking was the most significant risk for the Group’s operations. In 2018, the Group formulated the Administrative Measures of Subsidiary Bodies of China Minsheng Banking Corporation Limited on Comprehensive Risk Management to further enhance the risk management of its subsidiary bodies.

Based on new regulatory requirements and market changes, the Group formulated risk preferences and risk policies based on actual conditions, to clarify objectives of portfolio limitation management, improve risk quantification tools and information systems, and establish and improved risk management and control mechanisms covering the entire process. Meanwhile, to re-examine and optimise the preference transmission mechanism, risk policy, portfolio management, systems and tools based on implementation to ensure the implementation of preferences and policies, and strengthen the support of risk management for strategic decision-making.

The Bank has a Risk Management Committee under the Board of Directors, and the committee is responsible for setting the Bank’s overall risk management strategies, monitoring the Bank’s risk management policies and their implementation, and assessing the effectiveness. In accordance with the risk management strategies, the Bank’s senior management formulates and promotes compliance of risk management policies, practices and procedures.

The Development Planning Department under the Bank’s senior management is responsible for the routine management of subsidiaries, with a comprehensive risk management framework at the Group level gradually established and refined.

(2) Credit risk

The Group is exposed to credit risk, which is the risk that a borrower or counterparty defaults as it fails to fully repay debts in a timely manner due to various reasons. Credit risk is the most important risk for the Group’s operating activities; management therefore carefully manages its exposure to it. Credit exposures arise principally from lending, trade finance, credit debt securities and leasing activities. There is also credit risk in off-balance sheet financial instruments, such as credit commitments and derivatives.

289 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

The Bank is currently responsible for decision-making and overall coordination of credit risk prevention by the Risk Management Committee. The Bank adopts professional credit evaluation, full-process quality monitoring, faulty asset professional management and collecting and other major methods for credit risk management.

(i) Credit risk measurement

a Loans and credit commitments

The Group measures and manages the quality of its credit assets in accordance with the CBIRC Guidelines for Risk Classification of Loans (the “Guidelines”). The Guidelines require financial institutions to classify their credit assets into five categories, namely pass, special mention, sub-standard, doubtful and loss, of which the last three categories are non-performing loans. At the same time, the Group includes its off-balance sheet credit commitments as part of its overall credit extension, applies credit limit management, and classifies key on-balance sheet and off-balance sheet items in accordance with the Guidelines. The Bank has also developed the Administrative Measures for Risk Classification of Credit Assets of China Minsheng Banking Corporation Limited to guide its daily risk management of credit assets, following classification principles fully consistent with the Guidelines.

The core definitions of credit asset classifications in the Guidelines are as follows:

Pass: The borrower can fulfill contracts, and there is no sufficient reason to suspect that the principal and interest of loans cannot be repaid in full on time.

Special-mention: The borrower can make current payments, but there may be some potential issues that could adversely impact future payments.

Substandard: The borrower’s repayment ability has been impaired and its normal income is insufficient to repay the loan principal and interest in full. Even with the enforcement of the related guarantee (if any), there may be a certain level of loss.

Doubtful: The borrower can’t repay the principal plus the interest in full. Even with the enforcement of guarantee (if any), there will be a significant loss.

Loss: After taking all possible actions or resorting to all necessary legal proceedings, the loan principal and interest cannot be recovered or only a small portion of them can be recovered.

b Debt securities and other bills

The Group manages its credit risk exposure of debt securities and other bills by including issuers’ credit exposures into the unified credit-grant management and control processes. The Group continues to optimise its exposure structure by requiring a minimum external rating of the debt securities of investment access management and by setting investment structure concentration requirements of portfolio management. In addition, the risk control staff will regularly analyse the credit profile of issuers of debt securities, and the operational staff will continue to optimise and adjust the investment portfolio based on the risk-mitigation recommendations.

290 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(ii) Risk limit control and mitigation policies

The Group exercises risk concentration management and controls over its counterparties, whether individuals or groups, and industries and geographical regions.

The Group has established relevant mechanisms to apply tiered management of credit risks, and set limits to acceptable risks for different individual or group counterparties, different industries and geographical regions. The Bank monitors the risk status regularly and reviews their risk positions at least once a year.

Risk exposures to borrowers, including banks, are further classified into on-and off-balance sheet risk exposures, and controls have been applied to daily risk limits of each trading account. The Bank also monitors basis actual risk exposures daily in relation to corresponding risk limits.

The Group controls its credit risks through, among other necessary measures, regular analyses of a customer’s ability to repay interest and principal, and making appropriate adjustments to credit lines.

Other specific control and mitigation measures include: measuring, evaluating, early warning, mitigating and controlling of large amount exposures of single and group customers in accordance with regulatory requirements, and prevent and control customer concentration risks, and

a Collateral

The Group and its subsidiaries have individually established a range of risk management policies and adopted different methods to mitigate credit risk. A critical method for the Group’s control of its credit risks is to acquire collateral, security deposits and guarantees from enterprises or individuals. The Group has specified acceptable types of collaterals, mainly including the following:

— Real estate and land use rights

— Machinery and equipment

— Right to receive payments and accounts receivable

— Financial instruments such as time deposits, debt securities and equities.

In order to minimise its credit risk, once an indication of impairment has been identified with an individual loan, the Group will seek additional collateral from counterparties/require additional guarantors or squeeze the credit line.

Collateral held as security for financial assets other than loans and accounts receivable is determined by the instruments’ nature. Debt securities are generally unsecured, with the exception of asset-backed securities and similar instruments, which are secured by portfolios of financial instruments.

b Derivative instruments

The Bank maintains strict net exposure limits in its financial derivative transactions with counterparties and monitors the activities through daily summary reports on the use of exposure limits. The Bank’s exposure to credit risk of derivative instruments is limited to derivative instruments with positive fair value. The Bank sets credit limits for counterparties in its management system to monitor the credit position of derivative transactions and mitigates credit risk associated with derivative instruments by requiring margin deposits from counterparties.

291 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(ii) Risk limit control and mitigation policies (continued)

c Credit related commitments

The primary purpose of these instruments is to ensure that funds are available to a customer when required. Guarantees and standby letters of credit, which represent irrevocable assurances that the Group will make payments in the event that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. In some cases, guarantee deposits are received by the Group to lessen the credit risks related to such commitments. The Group’s potential amount of credit risk exposure is equivalent to the total amount of credit commitments.

Loan commitments and financial leasing commitments represent unused portions of authorisations to extend credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.

(iii) ECL measurement

According to the new standard, the Group divided the financial instruments that require ECL provision recognition into three stages and applies the ECL model to calculate loss allowances for its debt financial instruments measured at amortized cost or at FVOCI, as well as its loan commitments and financial guarantee contracts.

Financial instrument risk stages

The Group applies a ‘three-stage model’ for measuring expected credit loss for financial instruments based on changes in credit quality since initial recognition: The three stages are defined as follows:

Stage 1: Financial instruments without significant increase in credit risk since initial recognition. For these assets, expected credit losses are recognised for the following 12 months.

Stage 2: For financial instruments with significant increase in credit risk since initial recognition, expected credit losses are recognised for the remaining lifetime if there is no objective evidence of impairment.

Stage 3: For financial assets with objective evidence of impairment as at the balance sheet date, expected credit losses are recognised for the remaining lifetime.

Criteria for significant increases in credit risk (“SICR”)

Criteria for SICR include but are not limited to:

— The principal or interest is overdue for more than 30 days;

— Significant change in credit rating. Internal rating results of the Group will be adopted as the result of credit rating;

— The debtor experiences serious production or operation problems, the overall profitability decreased significantly, and the financial position is poor;

— Changes or events with a significant negative impact on the solvency of the debtor;

— Other objective evidence of a significant increase in credit risk of financial asset.

292 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(iii) ECL measurement (continued)

Definition of credit-impaired financial asset

In order to evaluate whether a financial asset is impaired, the Group considers the following criteria:

— The principal or interest of a financial asset is overdue for more than 90 days;

— Significant financial difficulty of the issuer or obligor;

— A breach of contract by the borrower, such as a default or delinquency in interest or principal payments;

— The creditor, for economic or contractual reasons relating to the debtor’s financial difficulty, grants the debtor a concession that the Group would not otherwise consider;

— The debtor will probably enter bankruptcy or other financial reorganisation;

— The disappearance of an active market for that financial asset because of financial difficulties faced by the issuer or debtor;

— The purchase or origination of a financial asset at a significant discount that reflects the fact of credit losses;

— Other objective evidence of financial asset impairment.

The credit impairment of a financial asset may be caused by the combined effect of multiple events rather than any single event.

Parameters for ECL measurement

Except for credit-impaired financial assets, according to whether there is a significant increase in credit risk and whether there is an impairment of assets, the Group recognised 12-month or lifetime ECL allowance by financial instrument. Expected credit losses are the weighted average of the product of Probability of Default (PD), Loss Given Default (LGD), and Exposure at Default (EAD), which are defined as follows:

— PD represents the likelihood of a borrower to default on its financial obligation, either over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the obligation. The PD is determined based on the adjusted results of the internal rating-based model, with forward-looking information incorporated, to reflect the borrower’s point-in-time probability of default under the current macroeconomic environment;

— LGD is expressed as a percentage loss per unit of EAD. LGD varies by type of product and availability of collateral etc;

— EAD refers to the total amount of on-and off-balance sheet exposures in the event of default and is determined based on principal, interest, off-balance sheet risk conversion factor etc., and may vary by product types.

Forward-looking information incorporated in the ECL

The calculation of ECL incorporates forward-looking information. The Group has performed historical analysis and identified the key economic variables impacting credit risk and expected credit losses for each portfolio, such as GDP, M2 and customer confidence index and so on. The forecasts of these economic variables are provided periodically and the most relevant variables are picked and estimated by the Group.

293 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(iii) ECL measurement (continued)

Forward-looking information incorporated in the ECL (continued)

The Group determines the relationship between these economic variables and PD and LGD by constructing econometric model, so as to ascertain the impacts of historical changes in these variables on PD and LGD.

The Group determines the positive, neutral and negative scenarios and their weights according to the analysis of macro data and the judgement of experts, and calculate thereby the weighted average ECL allowance.

(iv) Maximum credit risk exposure

The following table presents the Group’s and the Bank’s maximum exposure to credit risk as at the end of the reporting period without considering any collateral held or other credit enhancements, which is represented by the carrying amount of each type of financial assets after deducting any impairment allowance.

Group Bank

2018 2017 2018 2017

Balances with central bank 382,297 434,858 378,423 430,227 Balances with banks and other financial institutions 52,154 75,257 38,688 50,149 Financial assets at fair value through profit or loss 310,733 69,564 310,605 68,996 Positive fair value of derivatives 33,112 18,734 33,007 18,696 Placements with banks and other financial institutions 246,525 143,205 264,255 145,705 Financial assets held under resale agreements 39,190 52,812 35,284 47,855 Loans and advances to customers — Corporate loans and advances 1,807,603 1,651,808 1,804,546 1,653,064 — Personal loans and advances 1,200,669 1,077,980 1,188,600 1,061,893 Investment securities — Debt securities 1,588,299 2,004,406 1,575,456 1,996,808 Long-term receivables 110,824 101,304 — — Other financial assets 38,568 80,720 22,882 63,193

Total 5,809,974 5,710,648 5,651,746 5,536,586

Off-balance sheet credit commitments 1,006,714 819,242 1,003,367 815,867

Maximum credit risk exposure 6,816,688 6,529,890 6,655,113 6,352,453

294 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(v) Analysis on the credit quality of financial instruments

As at 31 December 2018, the credit risk stages of financial instruments are as followed:

Group

Gross carrying amount Provision for expected credit losses _ _ Note Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Financial assets measured at amortised cost:

Cash and balances with central bank 389,281 — — 389,281 — — — — Balances with banks and other financial institutions 52,161 — 97 52,258 (7) — (97) (104) Placements with banks and other financial institutions 246,728 — — 246,728 (203) — — (203) Financial assets held under resale agreements 39,195 — — 39,195 (5) — — (5) Loans and advances to customers — Corporate loans and advances 1,612,811 107,458 27,412 1,747,681 (11,144) (16,311) (10,934) (38,389) — Personal loans and advances 1,189,668 16,644 27,184 1,233,496 (7,770) (4,918) (20,139) (32,827) Financial investments 1,121,094 2,141 7,055 1,130,290 (1,352) (204) (1,503) (3,059) Long-term receivables 103,457 9,959 1,053 114,469 (913) (2,184) (548) (3,645) Other financial assets (i) N/A N/A N/A 40,000 N/A N/A N/A (1,432)

Total 4,754,395 136,202 62,801 4,993,398 (21,394) (23,617) (33,221) (79,664)

295 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(v) Analysis on the credit quality of financial instruments (continued)

Group

Net carrying amount Provision for expected credit losses _ _ Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Financial assets at fair value through other comprehensive income:

Loans and advances to customers — Corporate loans and advances 97,453 — 858 98,311 (449) — (543) (992) Financial investments 460,843 — 225 461,068 (1,310) — (197) (1,507)

Total 558,296 — 1,083 559,379 (1,759) — (740) (2,499)

Credit commitments 1,005,533 1,082 99 1,006,714 (1,335) (33) (3) (1,371)

296 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(v) Analysis on the credit quality of financial instruments (continued)

Bank

Gross carrying amount Provision for expected credit losses _ _ Note Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Financial assets measured at amortised cost:

Cash and balances with central bank 385,239 — — 385,239 — — — — Balances with banks and other financial institutions 38,693 — — 38,693 (5) — — (5) Placements with banks and other financial institutions 264,458 — — 264,458 (203) — — (203) Financial assets held under resale agreements 35,289 — — 35,289 (5) — — (5) Loans and advances to customers — Corporate loans and advances 1,610,259 107,236 27,224 1,744,719 (11,001) (16,267) (10,809) (38,077) — Personal loans and advances 1,177,655 16,299 26,863 1,220,817 (7,505) (4,786) (19,926) (32,217) Financial investments 1,113,213 2,141 6,748 1,122,102 (1,325) (204) (1,396) (2,925) Other financial assets (i) N/A N/A N/A 24,168 N/A N/A N/A (1,286)

Total 4,624,806 125,676 60,835 4,835,485 (20,044) (21,257) (32,131) (74,718)

297 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(v) Analysis on the credit quality of financial instruments (continued)

Bank

Net carrying amount Provision for expected credit losses _ _ Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Financial assets at fair value through other comprehensive income:

Loans and advances to customers — Corporate loans and advances 97,046 — 858 97,904 (436) — (543) (979) Financial investments 456,054 — 225 456,279 (1,288) — (197) (1,485)

Total 553,100 — 1,083 554,183 (1,724) — (740) (2,464)

Credit commitments 1,002,186 1,082 99 1,003,367 (1,334) (33) (3) (1,370)

(i) As simplified approach of impairment allowance is applied to other financial assets, mainly including other receivables, three-stage model is not applicable.

298 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(v) Analysis on the credit quality of financial instruments (continued)

As at 31 December 2017, the analysis of the overdue situation of loans and advances to customers, RMB-denominated debt securities and long-term receivables is as follows:

Group Financial assets at Loans and fair value Available Held-to- advances to through for-sale maturity Loans and Long-term customers profit or loss securities securities receivables receivables

Gross balance Neither past due nor impaired 2,712,536 40,958 242,008 698,342 963,572 99,734 Past due but not impaired 43,882 — — — — 3,011 Impaired 47,889 — 175 88 1,664 1,985

Subtotal 2,804,307 40,958 242,183 698,430 965,236 104,730

Less: allowance for impairment loss Neither past due nor impaired (40,441) — — — (1,863) (2,313) Past due but not impaired (5,666) — — — — (377) Impaired (28,412) — (71) (55) (328) (736)

Subtotal (74,519) — (71) (55) (2,191) (3,426)

Total 2,729,788 40,958 242,112 698,375 963,045 101,304

299 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(v) Analysis on the credit quality of financial instruments (continued)

Bank Financial assets at Loans and fair value Available Held-to- advances to through for-sale maturity Loans and customers profit or loss securities securities receivables

Gross balance Neither past due nor impaired 2,697,936 40,958 241,986 698,342 961,457 Past due but not impaired 43,320 — — — — Impaired 47,358 — 50 88 1,664

Subtotal 2,788,614 40,958 242,036 698,430 963,121

Less: allowance for impairment loss Neither past due nor impaired (39,974) — — — (1,863) Past due but not impaired (5,605) — — — — Impaired (28,078) — (31) (55) (328)

Subtotal (73,657) — (31) (55) (2,191)

Total 2,714,957 40,958 242,005 698,375 960,930

300 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(vi) Loans and advances to customers

As at 31 December 2018, loans and advances to customers were analysed by types of collateral as follows:

2018

Group Bank

Stage 1 Unsecured loans 702,955 705,616 Guaranteed loans 560,794 555,426 Loans secured by — Tangible assets other than monetary assets 1,261,230 1,250,003 — Monetary assets 374,953 373,915

Subtotal 2,899,932 2,884,960

Stage 2 Unsecured loans 15,043 15,040 Guaranteed loans 50,019 49,752 Loans secured by — Tangible assets other than monetary assets 36,423 36,159 — Monetary assets 22,617 22,584

Subtotal 124,102 123,535

Stage 3 Unsecured loans 11,296 11,295 Guaranteed loans 24,483 24,303 Loans secured by — Tangible assets other than monetary assets 15,927 15,650 — Monetary assets 3,748 3,697

Subtotal 55,454 54,945

Total 3,079,488 3,063,440

Fair value of collateral held against credit-impaired loans 9,416 9,296

301 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(vi) Loans and advances to customers (continued)

The above collateral mainly includes land, buildings, machinery and equipment, etc. The fair value of collateral was estimated by the Group based on the latest external valuations available, adjusted in light of disposal experience and current market conditions.

As at 31 December 2017, credit risk of loans and advances to customers were analysed as follows:

(a) Neither past due nor impaired

2017

Group Bank

Unsecured loans 663,807 665,894 Guaranteed loans 590,852 584,910 Loans secured by — Tangible assets other than monetary assets 1,108,371 1,099,313 — Monetary assets 349,506 347,819

Total 2,712,536 2,697,936

(b) Past due but not impaired

As at 31 December 2017, the ageing analysis of each type of loans and advances to customers of the Group and the Bank were analysed as follows:

Group 2017

Less than 30 to 60 to More than 30 days 60 days 90 days 90 days Total

Corporate loans and advances 4,542 4,139 2,357 19,480 30,518 Personal loans and advances 6,167 2,716 3,260 1,221 13,364

Total 10,709 6,855 5,617 20,701 43,882

Bank 2017

Less than 30 to 60 to More than 30 days 60 days 90 days 90 days Total

Corporate loans and advances 4,536 4,139 2,356 19,479 30,510 Personal loans and advances 5,952 2,647 3,218 993 12,810

Total 10,488 6,786 5,574 20,472 43,320

302 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(vi) Loans and advances to customers (continued)

(b) Past due but not impaired (continued)

As at 31 December 2017, the balance of loans and advances past due but not impaired which were covered by collateral was RMB18,872 million. The fair value of collateral held against these loans and advances was amounted to RMB46,232 million.

Impaired loans and advances by type of collateral:

2017

Group Bank

Unsecured loans 7,263 7,262 Guaranteed loans 23,919 23,672 Loans secured by — Tangible assets other than monetary assets 12,602 12,328 — Monetary assets 4,105 4,096

Total 47,889 47,358

Fair value of collateral held against impaired loans 11,070 10,954

(vii) Loans and advances rescheduled

Rescheduling is a voluntary or, to a limited extent, court-supervised procedure, through which the Group and a borrower and/or its guarantor, if any, reschedule credit terms generally as a result of deterioration in the borrower’s financial condition or of the borrower’s inability to make payments when due. The Group reschedules a non-performing loan only if the borrower has good prospects. In addition, prior to approving the rescheduling of loans, the Group typically requires additional guarantees, pledges and/or collateral, or assumption of the loans by a borrower with better repayment ability. Rescheduled loans amounted to RMB18,978 million as at 31 December 2018 (31 December 2017: RMB14,837 million).

303 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(vii) Loans and advances rescheduled (continued)

Among impaired loans and advances, rescheduled loans and advances which were not past due or past due for no more than 90 days are as follows:

Group

2018 2017

Loans and advances to customers 1,827 2,438

% of total loans and advances 0.06% 0.09%

(viii) Amounts due from banks and other financial institutions

Amounts due from banks and other financial institutions include balances with banks and other financial institutions, placements with banks and other financial institutions and financial assets held under resale agreements of which counterparties are banks and non-bank financial institutions.

2018

Group Bank

Occurred credit impaired 97 — Allowances for impairment losses (97) —

Subtotal — —

Neither past due nor credit-impaired: Grade A to AAA 256,762 259,916 Grade B to BBB 60,928 60,607 Unrated 19,305 17,034

Total 336,995 337,557

Interest accrued 1,089 883 Allowances for impairment losses (215) (213)

Subtotal 337,869 338,227

Total 337,869 338,227

304 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(viii) Amounts due from banks and other financial institutions (continued)

2017

Group Bank

Neither past due nor impaired: Grade A to AAA 200,321 176,730 Grade B to BBB 22,552 21,417 Unrated 48,401 45,562

Total 271,274 243,709

Amounts due from banks and other financial institutions are analysed above according to the Group and the Bank’s internal credit rating. Exposure limits are set for banks and non-bank financial institutions.

305 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(ix) Distribution of debt securities analysed by rating

The ratings are obtained from Standard & Poor’s ratings, or major rating agencies where the issuers of the debt securities are located.

Group 2018

Unrated AAA AA A Lower than A Total

Occurred credit impaired — Banking and non-banking financial institution 6,958 — — — — 6,958 — Other corporates 322 — — — — 322

Total 7,280 — — — — 7,280

Less: the impairment of financial assets measured at amortized cost (1,503)

Subtotal 5,777

Neither overdue nor credit impaired — Government 3,485 766,945 137 51,341 — 821,908 — Policy banks — 49,680 150 7,115 1,308 58,253 — Banking and non-banking financial institution 583,041 154,335 6,194 21,392 14,782 779,744 — Other corporates 78,560 96,323 9,797 5,765 26,300 216,745

Total 665,086 1,067,283 16,278 85,613 42,390 1,876,650

Interest accrued 18,161 Less: the impairment of financial assets measured at amortized cost (1,556)

Subtotal 1,893,255

Total 1,899,032

306 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(ix) Distribution of debt securities analysed by rating (continued)

Bank 2018

Unrated AAA AA A Lower than A Total

Occurred credit impaired — Banking and non-banking financial institution 6,846 — — — — 6,846 — Other corporates 127 — — — — 127

Total 6,973 — — — — 6,973

Less: the impairment of financial assets measured at amortized cost (1,396)

Subtotal 5,577

Neither overdue nor credit impaired — Government 3,485 765,732 137 51,341 — 820,695 — Policy banks — 49,251 150 7,115 1,308 57,824 — Banking and non-banking financial institution 581,649 154,335 6,194 21,392 14,782 778,352 — Other corporates 74,753 96,323 9,797 5,525 20,646 207,044

Total 659,887 1,065,641 16,278 85,373 36,736 1,863,915

Interest accrued 18,098 Less: the impairment of financial assets measured at amortized cost (1,529)

Subtotal 1,880,484

Total 1,886,061

307 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(ix) Distribution of debt securities analysed by rating (continued)

The following tables show Standard & Poor’s ratings on foreign currency debt securities of the Group and the Bank as at 31 December 2017.

Group 2017

Financial assets at fair value Available Held-to- through for-sale maturity Loans and profit or loss securities securities receivables Total

AAA 25 620 — — 645 AA- to AA+ — 7,690 — — 7,690 A- to A+ 4,405 44,045 3,191 — 51,641 Lower than A- 14,121 20,714 6,521 — 41,356 Unrated 10,055 6,818 157 11,118 28,148

Total 28,606 79,887 9,869 11,118 129,480

Bank 2017

Financial assets at fair value Available Held-to- through for-sale maturity Loans and profit or loss securities securities receivables Total

AAA 25 620 — — 645 AA- to AA+ — 7,690 — — 7,690 A- to A+ 4,405 44,045 3,191 — 51,641 Lower than A- 13,793 20,213 6,521 — 40,527 Unrated 9,815 6,391 157 6,670 23,033

Total 28,038 78,959 9,869 6,670 123,536

The Group’s impaired debt securities which were individually assessed for impairment were valued at RMB2,262 million as at 31 December 2017, incurring an impairment loss of RMB765 million.

Analysis on the credit risk of RMB-denominated debt securities as at 31 December 2017 were discussed in Note 3 (v).

308 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(x) Credit risk concentration of financial assets

The Group conducts its credit business predominantly within mainland China, with major customers concentrated in a number of key industries. In China, different regions and different industries have their own unique characteristics in economic development. This has consequently exposed the Group’s operations to different credit risks. The Group continues to improve the management of risk concentration by industry and region to avoid excess lending to individual sectors, and to reduce credit extension to regions with scarce resources and fragile financial ecology.

a Geographical concentration

Financial assets other than securities (by location of business units)

Group

2018

Overseas and Northern Eastern Southern other PRC China China China regions Total

Balances with central bank 377,169 1,759 1,346 2,023 382,297 Balances with banks and other financial institutions 39,394 6,469 834 5,457 52,154 Placements with banks and other financial institutions 185,026 1,074 — 60,425 246,525 Financial assets held under resale agreements 37,389 — 1,771 30 39,190 Gross loans and advances to customers 887,069 959,738 490,744 741,937 3,079,488 Less: allowance for impairment losses (30,570) (13,351) (6,392) (20,903) (71,216) Long-term receivables 110,824 — — — 110,824 Other financial assets 61,279 1,768 1,343 7,290 71,680

Total 1,667,580 957,457 489,646 796,259 3,910,942

2017

Overseas and Northern Eastern Southern other PRC China China China regions Total

Balances with central bank 429,181 3,040 879 1,758 434,858 Balances with banks and other financial institutions 50,097 8,099 4,453 12,608 75,257 Placements with banks and other financial institutions 115,772 700 — 26,733 143,205 Financial assets held under resale agreements 51,708 — — 1,104 52,812 Gross loans and advances to customers 923,083 810,954 392,912 677,358 2,804,307 Less: allowance for impairment losses (27,637) (18,122) (8,861) (19,899) (74,519) Long-term receivables 101,304 — — — 101,304 Other financial assets 76,771 6,383 3,480 12,820 99,454

Total 1,720,279 811,054 392,863 712,482 3,636,678

309 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(x) Credit risk concentration of financial assets (continued)

a Geographical concentration (continued)

Financial assets other than securities (by location of business units) (continued)

Bank

2018

Overseas and Northern Eastern Southern other PRC China China China regions Total

Balances with central bank 377,114 110 1,096 103 378,423 Balances with banks and other financial institutions 32,995 3,434 145 2,114 38,688 Placements with banks and other financial institutions 202,756 1,074 — 60,425 264,255 Financial assets held under resale agreements 33,483 — 1,771 30 35,284 Gross loans and advances to customers 886,843 949,206 489,238 738,153 3,063,440 Less: allowance for impairment losses (30,556) (12,949) (6,331) (20,458) (70,294) Other financial assets 49,564 1,768 1,130 3,427 55,889

Total 1,552,199 942,643 487,049 783,794 3,765,685

2017

Overseas and Northern Eastern Southern other PRC China China China regions Total

Balances with central bank 429,136 381 532 178 430,227 Balances with banks and other financial institutions 31,484 4,798 3,184 10,683 50,149 Placements with banks and other financial institutions 115,772 700 — 29,233 145,705 Financial assets held under resale agreements 46,751 — — 1,104 47,855 Gross loans and advances to customers 922,809 801,204 391,453 673,148 2,788,614 Less: allowance for impairment losses (27,626) (17,692) (8,792) (19,547) (73,657) Other financial assets 63,844 6,254 3,264 8,527 81,889

Total 1,582,170 795,645 389,641 703,326 3,470,782

310 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(x) Credit risk concentration of financial assets (continued)

a Geographical concentration (continued)

Financial assets — securities (by location of issuers)

Group

2018

Mainland North China America Europe Others Total

Financial assets at fair value through profit or loss 284,024 70 14,945 11,694 310,733 Financial assets at fair value through other comprehensive income 405,921 2,443 26,923 25,781 461,068 Financial assets measured at amortised cost 1,115,901 6,426 — 4,904 1,127,231

Total 1,805,846 8,939 41,868 42,379 1,899,032

2017

Mainland North China America Europe Others Total

Financial assets at fair value through profit or loss 54,982 5,926 405 8,251 69,564 Available-for-sale debt securities 287,586 14,556 958 18,899 321,999 Held-to-maturity investments 702,510 5,659 — 75 708,244 Loans and receivables 971,849 348 — 1,966 974,163

Total 2,016,927 26,489 1,363 29,191 2,073,970

311 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(x) Credit risk concentration of financial assets (continued)

a Geographical concentration (continued)

Financial assets — securities (by location of issuers) (continued)

Bank

2018

Mainland North China America Europe Others Total

Financial assets at fair value through profit or loss 283,916 70 14,945 11,674 310,605 Financial assets at fair value through other comprehensive income 403,780 2,443 26,923 23,133 456,279 Financial assets measured at amortised cost 1,112,323 6,196 — 658 1,119,177

Total 1,800,019 8,709 41,868 35,465 1,886,061

2017

Mainland North China America Europe Others Total

Financial assets at fair value through profit or loss 54,910 5,926 405 7,755 68,996 Available-for-sale debt securities 287,479 14,556 958 17,971 320,964 Held-to-maturity investments 702,510 5,659 — 75 708,244 Loans and receivables 966,991 — — 609 967,600

Total 2,011,890 26,141 1,363 26,410 2,065,804

312 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(x) Credit risk concentration of financial assets (continued)

b Industry concentration

Group

2018 Governments and quasi- Financial governments institutions Manufacturing Real estate Others Individuals Total

Balances with central bank 382,297 — — — — — 382,297 Balances with banks and other financial institutions — 52,154 — — — — 52,154 Placements with banks and other financial institutions — 246,525 — — — — 246,525 Financial assets held under resale agreements — 39,190 — — — — 39,190 Corporate loans and advances — 84,721 297,238 386,117 1,039,527 — 1,807,603 — of which: balance secured by collateral — 44,484 133,868 319,671 480,790 — 978,813 Personal loans and advances — — — — — 1,200,669 1,200,669 — of which: balance secured by collateral — — — — — 719,932 719,932 Financial investments 830,898 844,077 20,323 26,001 177,733 — 1,899,032 Long-term receivables — 4,393 18,388 5,187 74,999 7,857 110,824 Other financial assets 401 34,011 369 2,485 34,414 — 71,680

Total 1,213,596 1,305,071 336,318 419,790 1,326,673 1,208,526 5,809,974

2017

Governments and quasi- Financial governments institutions Manufacturing Real estate Others Individuals Total

Balances with central bank 434,858 — — — — — 434,858 Balances with banks and other financial institutions — 75,257 — — — — 75,257 Placements with banks and other financial institutions — 143,205 — — — — 143,205 Financial assets held under resale agreements — 52,812 — — — — 52,812 Corporate loans and advances — 102,255 321,205 252,270 976,078 — 1,651,808 — of which: balance secured by collateral — 46,813 130,854 206,704 415,654 — 800,025 Personal loans and advances — — — — — 1,077,980 1,077,980 — of which: balance secured by collateral — — — — — 672,134 672,134 Investment securities — debt securities 805,788 928,881 36,774 65,574 167,389 — 2,004,406 Long-term receivables — 1,123 16,509 4,845 74,055 4,772 101,304 Other financial assets 9,045 53,246 9,495 7,162 82,381 7,689 169,018

Total 1,249,691 1,356,779 383,983 329,851 1,299,903 1,090,441 5,710,648

313 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(2) Credit risk (continued)

(x) Credit risk concentration of financial assets (continued)

b Industry concentration (continued)

Bank

2018 Governments and quasi- Financial governments institutions Manufacturing Real estate Others Individuals Total

Balances with central bank 378,423 — — — — — 378,423 Balances with banks and other financial institutions — 38,688 — — — — 38,688 Placements with banks and other financial institutions — 264,255 — — — — 264,255 Financial assets held under resale agreements — 35,284 — — — — 35,284 Corporate loans and advances — 87,730 294,883 386,111 1,035,822 — 1,804,546 — of which: balance secured by collateral — 44,484 132,358 319,668 479,071 — 975,581 Personal loans and advances — — — — — 1,188,600 1,188,600 — of which: balance secured by collateral — — — — — 710,431 710,431 Financial investments 829,685 842,395 19,922 25,762 168,297 — 1,886,061 Other financial assets 400 33,914 367 2,480 18,728 — 55,889

Total 1,208,508 1,302,266 315,172 414,353 1,222,847 1,188,600 5,651,746

2017 Governments and quasi- Financial governments institutions Manufacturing Real estate Others Individuals Total

Balances with central bank 430,227 — — — — — 430,227 Balances with banks and other financial institutions — 50,149 — — — — 50,149 Placements with banks and other financial institutions — 145,705 — — — — 145,705 Financial assets held under resale agreements — 47,855 — — — — 47,855 Corporate loans and advances — 104,759 320,639 252,270 975,396 — 1,653,064 — of which: balance secured by collateral — 46,813 130,331 206,704 415,208 — 799,056 Personal loans and advances — — — — — 1,061,893 1,061,893 — of which: balance secured by collateral — — — — — 661,768 661,768 Investment securities — debt securities 805,095 927,696 36,705 64,859 162,453 — 1,996,808 Other financial assets 8,890 52,911 9,489 7,041 64,956 7,598 150,885

Total 1,244,212 1,329,075 366,833 324,170 1,202,805 1,069,491 5,536,586

314 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk

The Group is exposed to market risk, which is the risk of loss to its on- and off-balance sheet businesses caused by unfavourable changes in market prices (interest rates, exchange rates, and stock and commodity prices). Market risk includes interest rate risk, exchange rate (including gold bullion) risk, equity price risk and commodity price risk, arising from adverse movements in interest rates, exchange rates, stock prices and commodity price, respectively.

The market risk faced by the Group mainly arises from the Bank’s business activities. The Bank’s subsidiaries are exposed to an insignificant level of market risk. The Bank and its subsidiaries independently manage their own market risk.

The Bank distinguishes between banking books and trading books in accordance with requirements of regulatory authorities and the general practices of the banking industry, and adopts different methods to identify, measure, monitor and control their respective market risks based on the nature and characteristics of banking and trading books.

Trading books refer to the financial instruments and commodities positions which could be traded freely. They are held by the Bank for trading or hedging against other risks in the trading book. Positions in the trading book must not be subject to any trading restrictions, or be able to fully hedged against the risks. These positions must also be valued accurately and managed proactively as well. In contrast, the Bank’s other businesses are included in the banking books.

(i) Market risk measurement techniques

The Bank selects appropriate and generally accepted measurement methods for the different types of market risks in its banking books and trading books based on actual needs of the business.

In accordance with regulatory requirements and in response to interest rate risk of the banking books, the Bank develops measurement methods that are appropriate for the size and structure of its assets and liabilities, and performs quantitative assessment of the impact of interest rate changes on the Bank’s net interest income and economic value by adopting methods such as gap analysis, net interest income simulation analysis, and economic value simulation analysis.

Interest rate risk of the trading books are measured by using methods such as duration analysis, scenario analysis, and value at risk (VaR).

Exchange rate risks of the banking books include exposure in foreign exchange settlement and sales, foreign currency capital funds, loss in foreign currency profits due to settlement of foreign exchange, and shrinking of foreign currency assets compared to the local currency. The Bank assesses the impact of future Currency risks based on the exchange rate tendency and the future changes in the Bank’s asset and liability portfolios.

Measurement of the exchange rate risks of the trading books includes monitoring of foreign exchange exposure, and use of methods including sensitivity analysis, scenario analysis and value at risk (VaR) to measure the potential impact of exchange rate fluctuations on the trading profits.

The Bank is fully aware of the pros and cons of different methods for measurement of market risks, and therefore adopts other methods, such as stress tests, for complementation. Stress scenarios applied to market risk stress testing include expert scenarios, historical scenarios, and hybrid scenarios.

315 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(ii) Currency risk Currency risk refers to the foreign exchange and foreign exchange derivatives positions, the risk of losses of banks arise from adverse changes of exchange rate. The Group uses RMB as its bookkeeping currency, and the Group’s assets and liabilities are denominated in RMB, and the rest mainly US dollars and Hong Kong dollars.

The Group manage the Currency risk by controlling each currency exposure limits and total exposure.

The primary techniques applied by the Group in analysing Currency risk are mainly foreign exchange exposure analyses; scenario analyses; stress testing; and value at risk (VaR) method. The Group manage the Currency risk in the frame of the exposure limit by daily monitoring; reporting and analysing.

The following tables present the Group’s and the Bank’s Currency risk exposures as at the end of the reporting period. The carrying values of assets and liabilities denominated in foreign currencies have been converted into RMB.

Group

2018

RMB USD HKD Others Total

Assets: Cash and balances with central bank 348,249 40,517 260 255 389,281 Balances with banks and other financial institutions 27,632 18,254 4,017 2,251 52,154 Placements with banks and other financial institutions 206,562 30,503 6,987 2,473 246,525 Financial assets held under resale agreements 39,184 6 — — 39,190 Loans and advances to customers 2,836,711 119,860 28,266 23,435 3,008,272 Financial investments 1,813,972 137,928 8,571 9,546 1,970,017 Long-term receivables 83,328 27,496 — — 110,824 Other assets 128,068 32,767 1,776 15,948 178,559

Total assets 5,483,706 407,331 49,877 53,908 5,994,822

Liabilities: Borrowings from central bank 304,323 — — — 304,323 Deposits from customers 2,993,570 174,166 14,996 11,709 3,194,441 Deposits and placements from banks and other financial institutions 965,652 105,781 7,031 13,396 1,091,860 Financial assets sold under repurchase agreements 81,067 8,065 — 555 89,687 Borrowings from banks and other financial institutions 73,960 47,795 3,288 — 125,043 Debt securities issued 653,851 20,672 — — 674,523 Other liabilities 76,674 6,144 851 275 83,944

Total liabilities 5,149,097 362,623 26,166 25,935 5,563,821

Net position 334,609 44,708 23,711 27,973 431,001

Foreign currency derivatives 324 (1,857) 74 — (1,459) Off-balance sheet credit commitments 955,252 41,014 3,024 7,424 1,006,714

316 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(ii) Currency risk (continued)

Group (continued)

2017

RMB USD HKD Others Total

Assets: Cash and balances with central bank 402,256 40,293 175 214 442,938 Balances with banks and other financial institutions 35,892 26,228 7,496 5,641 75,257 Financial assets at fair value through profit or loss 43,644 30,286 303 368 74,601 Placements with banks and other financial institutions 119,666 13,934 6,450 3,155 143,205 Financial assets held under resale agreements 52,812 — — — 52,812 Loans and advances to customers 2,563,333 111,048 30,527 24,880 2,729,788 Investment securities 1,960,359 88,583 4,169 8,185 2,061,296 Long-term receivables 76,372 24,932 — — 101,304 Other assets 140,257 54,304 5,421 20,903 220,885

Total assets 5,394,591 389,608 54,541 63,346 5,902,086

Liabilities: Borrowings from central bank 335,173 — — — 335,173 Deposits from customers 2,750,441 188,439 21,547 5,884 2,966,311 Deposits and placements from banks and other financial institutions 1,163,855 127,023 6,723 18,392 1,315,993 Financial assets sold under repurchase agreements 104,680 2,842 — — 107,522 Borrowings from banks and other financial institutions 94,080 49,479 3,440 — 146,999 Debt securities issued 484,969 16,958 — — 501,927 Other liabilities 127,174 9,563 1,556 56 138,349

Total liabilities 5,060,372 394,304 33,266 24,332 5,512,274

Net position 334,219 (4,696) 21,275 39,014 389,812

Foreign currency derivatives (4,053) (2,561) (219) — (6,833) Off-balance sheet credit commitments 765,392 41,628 5,245 6,977 819,242

317 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(ii) Currency risk (continued)

Bank

2018

RMB USD HKD Others Total

Assets: Cash and balances with central bank 344,207 40,517 260 255 385,239 Balances with banks and other financial institutions 17,713 15,833 2,901 2,241 38,688 Placements with banks and other financial institutions 216,880 37,242 7,660 2,473 264,255 Financial assets held under resale agreements 35,278 6 — — 35,284 Loans and advances to customers 2,818,578 119,860 31,273 23,435 2,993,146 Financial investments 1,810,351 129,242 5,292 9,497 1,954,382 Other assets 113,258 2,950 3,062 15,948 135,218

Total assets 5,356,265 345,650 50,448 53,849 5,806,212

Liabilities: Borrowings from central bank 303,837 — — — 303,837 Deposits from customers 2,965,264 174,628 15,511 11,709 3,167,112 Deposits and placements from banks and other financial institutions 970,285 107,330 7,032 13,397 1,098,044 Financial assets sold under repurchase agreements 81,041 7,032 — 555 88,628 Debt securities issued 648,728 20,668 — — 669,396 Other liabilities 62,861 2,298 671 264 66,094

Total liabilities 5,032,016 311,956 23,214 25,925 5,393,111

Net position 324,249 33,694 27,234 27,924 413,101

Foreign currency derivatives 324 (1,857) 74 — (1,459) Off-balance sheet credit commitments 954,757 38,162 3,024 7,424 1,003,367

318 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(ii) Currency risk (continued)

Bank (continued)

2017

RMB USD HKD Others Total

Assets: Cash and balances with central bank 397,389 40,293 175 214 438,071 Balances with banks and other financial institutions 12,751 24,563 7,198 5,637 50,149 Financial assets at fair value through profit or loss 43,390 28,199 — 368 71,957 Placements with banks and other financial institutions 122,166 13,934 6,450 3,155 145,705 Financial assets held under resale agreements 47,855 — — — 47,855 Loans and advances to customers 2,545,998 111,048 33,031 24,880 2,714,957 Investment securities 1,957,599 84,692 2,683 8,185 2,053,159 Other assets 120,003 25,225 5,912 20,903 172,043

Total assets 5,247,151 327,954 55,449 63,342 5,693,896

Liabilities: Borrowings from central bank 334,500 — — — 334,500 Deposits from customers 2,720,026 188,465 21,646 5,884 2,936,021 Deposits and placements from banks and other financial institutions 1,171,496 128,020 6,724 18,392 1,324,632 Financial assets sold under repurchase agreements 104,555 2,835 — — 107,390 Debt securities issued 483,971 16,958 — — 500,929 Other liabilities 112,013 5,274 913 34 118,234

Total liabilities 4,926,561 341,552 29,283 24,310 5,321,706

Net position 320,590 (13,598) 26,166 39,032 372,190

Foreign currency derivatives (4,053) (2,561) (219) — (6,833) Off-balance sheet credit commitments 764,846 38,799 5,245 6,977 815,867

319 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(ii) Currency risk (continued)

The Group conducts sensitivity analysis on the net foreign currency position to identify the impact on the income statement of potential movements in foreign currency exchange rates against the RMB. As at 31 December 2018, assuming other variables remain unchanged, an appreciation of one hundred basis points of the US dollar against the RMB would increase both the Group’s net profit and equity by RMB138 million (31 December 2017: increase by RMB80 million); a depreciation of one hundred basis points of the US dollar against the RMB would decrease both the Group’s net profit and equity by RMB138 million (31 December 2017: decrease by RMB80 million).

The sensitivity analysis mentioned above is based on a static foreign exchange exposure profile of assets and liabilities that makes the following assumptions:

a The sensitivity of each type of exchange rate refers to the exchange gain or loss caused by a fluctuation in the absolute value of closing foreign currency rate by one hundred basis points against the RMB’s average rate on the reporting date;

b The fluctuation of exchange rates by one hundred basis points is based on the assumption of exchange rates movement from the current reporting date to the next reporting date;

c The fluctuation of exchange rates for all foreign currencies represents the fluctuation of exchange rates in US dollars and other foreign currencies against RMB in the same direction simultaneously. Due to the immaterial proportion of the Group’s total assets and liabilities denominated in currencies other than US dollars, other foreign currencies are converted into US dollars through sensitivity analysis;

d The foreign exchange exposures calculated includes spot and forward foreign exchange exposures and swaps;

e Other variables (including interest rates) remained unchanged; and

f The analysis does not take into account the effect of risk management measures taken by the Group.

Due to the adoption of the aforementioned assumptions, the actual changes in the Group’s net profit or loss and equity caused by the increase or decrease in exchange rates might vary from the estimated results of this sensitivity analysis.

(iii) Interest rate risk

Interest rate risk refers to the adverse changes of the level of interest rate, term structure and other factors, which lead to loss on the economic value and bank revenue. Interest rate risk include gap risk, basis risk and option risk, and the gap risk and basis risk is the mainly sources of risk for the Group.

The primary techniques applied by the Group in measuring and analysing interest rate risk are mainly scenario analyses; re pricing gap analyses; duration analyses and stress testing. The Group manage the interest rate risk in the frame of the exposure limit by monthly monitoring and reporting.

The Group closely monitors trends of interest rate changes for both RMB and foreign currencies, follows market interest rate changes, performs proper scenario analyses, and adjusts interest rates of deposits and loans in both RMB and foreign currencies to manage interest rate risk.

320 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(iii) Interest rate risk (continued)

The following tables present the Group’s and the Bank’s exposure to interest rate risk, indicating net carrying amounts of assets and liabilities based on their contractual repricing dates (or maturity dates whichever are earlier).

Group

2018

Less than 3 to 12 1 to 5 More than Non-interest Note 3 months months years 5 years bearing Total

Assets: Cash and balances with central bank 382,297 — — — 6,984 389,281 Balances with banks and other financial institutions 44,938 6,573 643 — — 52,154 Placements with banks and other financial institutions 65,678 156,307 24,540 — — 246,525 Financial assets held under resale agreements 37,862 1,328 — — — 39,190 Loans and advances to customers (i) 2,371,409 346,628 228,890 61,345 — 3,008,272 Financial investments 312,315 553,118 874,195 223,570 6,819 1,970,017 Long-term receivables 110,824 — — — — 110,824 Other assets 647 1,254 — — 176,658 178,559

Total assets 3,325,970 1,065,208 1,128,268 284,915 190,461 5,994,822

Liabilities: Borrowings from central bank 35,557 268,766 — — — 304,323 Deposits from customers 2,374,619 645,563 174,094 165 — 3,194,441 Deposits and placements from banks and other financial institutions 831,636 256,795 3,429 — — 1,091,860 Financial assets sold under repurchase agreements 86,388 1,522 1,777 — — 89,687 Borrowings from banks and other financial institutions 38,311 52,682 17,757 16,293 — 125,043 Debt securities issued 201,846 258,626 116,220 97,831 — 674,523 Other liabilities 967 — — 20 82,957 83,944

Total liabilities 3,569,324 1,483,954 313,277 114,309 82,957 5,563,821

Total interest sensitivity gap (243,354) (418,746) 814,991 170,606 107,504 431,001

321 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(iii) Interest rate risk (continued)

Group (continued)

2017

Less than 3 to 12 1 to 5 More than Non-interest Note 3 months months years 5 years bearing Total

Assets: Cash and balances with central bank 434,858 — — — 8,080 442,938 Balances with banks and other financial institutions 71,335 3,922 — — — 75,257 Financial assets at fair value through profit or loss 13,394 17,709 40,932 1,503 1,063 74,601 Placements with banks and other financial institutions 46,865 90,626 5,714 — — 143,205 Financial assets held under resale agreements 50,130 2,682 — — — 52,812 Loans and advances to customers (i) 2,177,749 333,596 176,896 41,547 — 2,729,788 Investment securities 289,294 697,922 689,443 378,999 5,638 2,061,296 Long-term receivables 101,304 — — — — 101,304 Other assets 9,322 6,198 — — 205,365 220,885

Total assets 3,194,251 1,152,655 912,985 422,049 220,146 5,902,086

Liabilities: Borrowings from central bank 23,673 311,500 — — — 335,173 Deposits from customers 2,309,543 510,302 146,059 407 — 2,966,311 Deposits and placements from banks and other financial institutions 1,110,312 203,681 2,000 — — 1,315,993 Financial assets sold under repurchase agreements 93,188 14,287 47 — — 107,522 Borrowings from banks and other financial institutions 42,377 73,311 18,278 13,033 — 146,999 Debt securities issued 227,727 102,464 72,849 98,887 — 501,927 Other liabilities — 3,373 — — 134,976 138,349

Total liabilities 3,806,820 1,218,918 239,233 112,327 134,976 5,512,274

Total interest sensitivity gap (612,569) (66,263) 673,752 309,722 85,170 389,812

(i) For loans and advances to customers of the Group, the “less than 3 months” category includes overdue amounts (net of allowances for impairment losses) of RMB42,161 million as at 31 December 2018 (31 December 2017: RMB55,977 million).

322 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(iii) Interest rate risk (continued)

Bank

2018

Less than 3 to 12 1 to 5 More than Non-interest Note 3 months months years 5 years bearing Total

Assets: Cash and balances with central bank 378,423 — — — 6,816 385,239 Balances with banks and other financial institutions 33,176 4,869 643 — — 38,688 Placements with banks and other financial institutions 72,483 167,232 24,540 — — 264,255 Financial assets held under resale agreements 35,284 — — — — 35,284 Loans and advances to customers (i) 2,361,688 343,582 227,701 60,175 — 2,993,146 Financial investments 309,383 547,964 868,684 222,963 5,388 1,954,382 Other assets 647 1,254 — — 133,317 135,218

Total assets 3,191,084 1,064,901 1,121,568 283,138 145,521 5,806,212

Liabilities: Borrowings from central bank 35,507 268,330 — — — 303,837 Deposits from customers 2,356,218 640,551 170,311 32 — 3,167,112 Deposits and placements from banks and other financial institutions 837,326 257,289 3,429 — — 1,098,044 Financial assets sold under repurchase agreements 85,345 1,506 1,777 — — 88,628 Debt securities issued 201,813 258,585 111,183 97,815 — 669,396 Other liabilities 873 — — — 65,221 66,094

Total liabilities 3,517,082 1,426,261 286,700 97,847 65,221 5,393,111

Total interest sensitivity gap (325,998) (361,360) 834,868 185,291 80,300 413,101

323 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(iii) Interest rate risk (continued)

Bank (continued)

2017

Less than 3 to 12 1 to 5 More than Non-interest Note 3 months months years 5 years bearing Total

Assets: Cash and balances with central bank 430,227 — — — 7,844 438,071 Balances with banks and other financial institutions 48,642 1,507 — — — 50,149 Financial assets at fair value through profit or loss 11,780 17,709 40,436 1,503 529 71,957 Placements with banks and other financial institutions 46,865 93,126 5,714 — — 145,705 Financial assets held under resale agreements 47,855 — — — — 47,855 Loans and advances to customers (i) 2,167,443 330,703 176,089 40,722 — 2,714,957 Investment securities 287,133 695,114 686,951 378,807 5,154 2,053,159 Other assets 9,322 6,198 — — 156,523 172,043

Total assets 3,049,267 1,144,357 909,190 421,032 170,050 5,693,896

Liabilities: Borrowings from central bank 23,000 311,500 — — — 334,500 Deposits from customers 2,288,667 504,664 142,684 6 — 2,936,021 Deposits and placements from banks and other financial institutions 1,118,561 204,071 2,000 — — 1,324,632 Financial assets sold under repurchase agreements 93,103 14,287 — — — 107,390 Debt securities issued 227,727 102,464 71,851 98,887 — 500,929 Other liabilities — 3,373 — — 114,861 118,234

Total liabilities 3,751,058 1,140,359 216,535 98,893 114,861 5,321,706

Total interest sensitivity gap (701,791) 3,998 692,655 322,139 55,189 372,190

(i) For loans and advances to customers of the Bank, the “less than 3 months” category includes overdue amounts (net of allowances for impairment losses) of RMB41,612 million as at 31 December 2018 (31 December 2017: RMB55,292 million).

324 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(3) Market risk (continued)

(iii) Interest rate risk (continued)

If yield curves for respective currencies move in parallel for 100 basis points on 1 January, their potential impact on the Group’s and the Bank’s net interest income and shareholders’ equity for the following year is as follows:

Group Bank

2018 2017 2018 2017 (Loss)/gain (Loss)/gain (Loss)/gain (Loss)/gain

Up 100 bps parallel shift in yield curves (2,775) (4,206) (3,156) (4,594) Down 100 bps parallel shift in yield curves 2,775 4,206 3,156 4,594

In performing the interest rate sensitivity analysis, the Group and the Bank have made general assumptions in defining business terms and financial parameters, but have not considered the following:

a business changes after the end of the reporting period, as the analysis is performed based on the static gap at the end of the reporting period;

b the impact of interest rate fluctuations on customers’ behaviour;

c the complicated relationship between complex structured products (e.g. embedded call options and other derivative financial instruments) and interest rate fluctuations;

d the impact of interest rate fluctuations on market prices;

e the impact of interest rate fluctuations on off-balance sheet products;

f the impact of interest rate fluctuations on fair value of financial instruments;

g other variables (including foreign exchange rate); and

h other risk management measures in the Group.

(4) Liquidity risk

Liquidity risk is the risk that the Group is unable to promptly obtain funds at reasonable cost to repay maturing liabilities, discharge other payment obligations and meet other funding needs in the course of normal operations.

During the reporting period, the Bank’s subsidiaries manage their respective liquidity risks according to the Group’s liquidity risk management framework, and the Bank manages the liquidity risk of all its branches and business lines.

The Bank is exposed to daily calls on its available cash resources from overnight deposits, demand deposits, maturing time deposits, loan drawdowns, guarantees and other calls on cash-settled derivatives. The Bank does not maintain cash resources to meet all these needs, as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Bank sets limits on the minimum proportion of maturing funds available to meet such calls and on the minimum level of interbank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand.

During the reporting period, the Bank was required to maintain 11% of the total RMB denominated deposits and 5% of the total foreign currency denominated balances as statutory reserves with the PBOC.

Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the full amounts under commitments, because the Bank does not generally expect the third party to fully draw funds under those agreements. The total outstanding contractual amount of commitments to extend credit does not necessarily represent future cash requirements, since many of these commitments will expire or terminate without being funded.

325 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(i) Liquidity risk management policy

The Bank and its subsidiaries separately and independently develop their liquidity risk management policies.

The Board of Directors is ultimately responsible for liquidity risk management including reviewing and approving liquidity risk appetite, liquidity risk management strategy, major policies and procedures. The Bank’s senior management is responsible for formulating liquidity risk management policies according to the development strategy of the Bank. The Assets and Liabilities Management Department is responsible for the daily liquidity risk management through the following procedures:

— To manage the day-to-day position through monitoring the future cash flow to ensure it meets the required fund position, including matured deposits and replenishment of funds for loan demand. The Bank actively participates in global money market transactions to ensure that the Bank’s funding requirements are satisfied;

— To set ratio requirements and transactions limits to help monitor and manage liquidity risks. The ratios include but are not limited to liquidity coverage ratios, liquidity ratios, net stable funding ratios;

— To measure and monitor cash flows through the Bank’s asset and liabilities management system, and perform liquidity scenario analyses and stress testing on overall assets and liabilities to satisfy internal and external requirements. Various techniques are used to estimate the Bank’s liquidity requirements, and liquidity risk management decisions are made based on the estimated liquidity requirements and within respective terms of reference. A periodical reporting system is established to promptly update senior management on latest liquidity risk information;

— To monitor the maturity concentration risk of financial assets and hold an appropriate quantity of high-liquidity and high-market-value assets to ensure the Bank is well positioned to fund its repayment obligations and business growth in the event of an interruption of cash flows due to whatever causes.

326 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(ii) Maturity analysis

The following tables analyse the Group’s and the Bank’s assets and liabilities based on remaining periods to repayment as at the end of the reporting period.

Group

2018

Repayable Less than 1 to 3 3 to 12 1 to 5 More than Indefinite on demand 1 month months months years 5 years Total

Note (i) Assets: Cash and balances with central bank 336,665 52,616 — — — — — 389,281 Balances with banks and other financial institutions — 37,969 3,054 3,915 6,573 643 — 52,154 Placements with banks and other financial institutions — — 43,427 22,251 156,307 24,540 — 246,525 Financial assets held under resale agreements — — 36,962 900 1,328 — — 39,190 Loans and advances to customers (ii) 35,418 7,464 524,849 216,902 904,474 794,671 524,494 3,008,272 Financial investments — Financial assets at fair value through profit or loss 63,049 — 28,075 41,189 192,414 52,024 4,342 381,093 — Financial assets at fair value through other comprehensive income 1,193 — 15,538 24,505 126,409 235,707 58,341 461,693 — Financial assets measured at amortised cost 7,648 761 40,374 47,514 246,004 621,287 163,643 1,127,231 Long-term receivables 3,522 59 5,199 5,274 26,333 58,329 12,108 110,824 Other assets 39,458 11,945 13,854 7,881 35,683 31,313 38,425 178,559

Total assets 486,953 110,814 711,332 370,331 1,695,525 1,818,514 801,353 5,994,822

Liabilities: Borrowings from central bank — — 9,130 26,427 268,766 — — 304,323 Deposits from customers — 1,326,493 665,344 382,782 645,563 174,094 165 3,194,441 Deposits and placements from banks and other financial institutions — 176,492 292,203 362,941 256,795 3,429 — 1,091,860 Financial assets sold under repurchase agreements — — 78,834 7,554 1,522 1,777 — 89,687 Borrowings from banks and other financial institutions — — 17,289 21,022 52,682 17,757 16,293 125,043 Debt securities issued — — 26,207 173,955 258,626 116,220 99,515 674,523 Other liabilities 1,950 13,449 34,751 12,160 16,606 4,633 395 83,944

Total liabilities 1,950 1,516,434 1,123,758 986,841 1,500,560 317,910 116,368 5,563,821

Net position 485,003 (1,405,620) (412,426) (616,510) 194,965 1,500,604 684,985 431,001

Notional amount of derivatives — — 590,542 669,595 1,675,640 443,834 12,622 3,392,233

327 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(ii) Maturity analysis (continued)

Group (continued)

2017

Repayable Less than 1 to 3 3 to 12 1 to 5 More than Indefinite on demand 1 month months months years 5 years Total

Note (i) Assets: Cash and balances with central bank 408,965 33,973 — — — — — 442,938 Balances with banks and other financial institutions — 59,170 6,231 5,934 3,922 — — 75,257 Financial assets at fair value through profit or loss 5,037 — 3,900 5,448 17,780 40,933 1,503 74,601 Placements with banks and other financial institutions — — 28,465 18,400 90,626 5,714 — 143,205 Financial assets held under resale agreements 400 — 40,189 9,541 2,682 — — 52,812 Loans and advances to customers (ii) 49,157 8,536 407,013 239,300 928,326 606,502 490,954 2,729,788 Investment securities — available-for-sale securities 56,906 — 7,136 17,698 79,602 170,064 47,483 378,889 — held-to-maturity securities 33 — 1,373 2,840 37,631 360,821 305,546 708,244 — loans and receivables 1,334 — 121,382 66,989 577,836 179,371 27,251 974,163 Long-term receivables 4,071 — 5,155 5,408 22,107 54,377 10,186 101,304 Other assets 64,514 21,825 10,982 20,142 42,517 42,330 18,575 220,885

Total assets 590,417 123,504 631,826 391,700 1,803,029 1,460,112 901,498 5,902,086

Liabilities: Borrowings from central bank — — — 23,673 311,500 — — 335,173 Deposits from customers 4,098 1,371,679 582,424 351,743 510,302 146,059 6 2,966,311 Deposits and placements from banks and other financial institutions — 175,494 411,300 523,518 203,681 2,000 — 1,315,993 Financial assets sold under repurchase agreements — — 81,332 11,856 14,334 — — 107,522 Borrowings from banks and other financial institutions — — 16,265 26,112 73,311 18,278 13,033 146,999 Debt securities issued — — 63,989 163,738 102,464 72,849 98,887 501,927 Other liabilities 4,373 35,169 43,087 17,368 30,996 4,927 2,429 138,349

Total liabilities 8,471 1,582,342 1,198,397 1,118,008 1,246,588 244,113 114,355 5,512,274

Net position 581,946 (1,458,838) (566,571) (726,308) 556,441 1,215,999 787,143 389,812

Notional amount of derivatives — — 513,820 456,739 809,650 176,333 10,230 1,966,772

328 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(ii) Maturity analysis (continued)

Bank

2018

Repayable Less than 1 to 3 3 to 12 1 to 5 More than Indefinite on demand 1 month months months years 5 years Total

Note (i)

Assets: Cash and balances with central bank 334,171 51,068 — — — — — 385,239 Balances with banks and other financial institutions — 29,304 301 3,571 4,869 643 — 38,688 Placements with banks and other financial institutions — — 45,434 27,049 167,232 24,540 — 264,255 Financial assets held under resale agreements — — 35,124 160 — — — 35,284 Loans and advances to customers (ii) 34,926 7,389 523,769 218,180 895,587 792,329 520,966 2,993,146 Investment securities — Financial assets at fair value through profit or loss 60,335 — 28,075 41,190 192,336 52,023 4,342 378,301 — Financial assets at fair value through other comprehensive income 850 — 15,529 24,504 126,038 231,905 58,078 456,904 — Financial assets measured at amortised cost 7,450 761 40,109 46,336 241,299 619,579 163,643 1,119,177 Other assets 35,976 8,420 11,557 7,416 31,419 21,819 18,611 135,218

Total assets 473,708 96,942 699,898 368,406 1,658,780 1,742,838 765,640 5,806,212

Liabilities: Borrowings from central bank — — 9,130 26,377 268,330 — — 303,837 Deposits from customers — 1,312,462 663,350 380,406 640,551 170,311 32 3,167,112 Deposits and placements from banks and other financial institutions — 180,961 293,832 362,533 257,289 3,429 — 1,098,044 Financial assets sold under repurchase agreements — — 77,791 7,554 1,506 1,777 — 88,628 Debt securities issued — — 26,203 173,927 258,585 111,183 99,498 669,396 Other liabilities 1,505 12,487 25,452 6,747 16,102 3,610 191 66,094

Total liabilities 1,505 1,505,910 1,095,758 957,544 1,442,363 290,310 99,721 5,393,111

Net position 472,203 (1,408,968) (395,860) (589,138) 216,417 1,452,528 665,919 413,101

Notional amount of derivatives — — 590,542 669,595 1,675,641 441,364 7,316 3,384,458

329 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(ii) Maturity analysis (continued)

Bank (continued)

2017 Repayable Less than 1 to 3 3 to 12 1 to 5 More than Indefinite on demand 1 month months months years 5 years Total Note (i)

Assets: Cash and balances with central bank 406,439 31,632 — — — — — 438,071 Balances with banks and other financial institutions — 40,022 4,767 3,853 1,507 — — 50,149 Financial assets at fair value through profit or loss 2,961 — 3,900 5,448 17,709 40,436 1,503 71,957 Placements with banks and other financial institutions — — 28,465 18,400 93,126 5,714 — 145,705 Financial assets held under resale agreements 400 — 40,189 7,266 — — — 47,855 Loans and advances to customers (ii) 48,670 8,325 405,881 239,934 919,478 604,151 488,518 2,714,957 Investment securities — available-for-sale securities 56,280 — 7,082 17,698 79,581 169,383 47,291 377,315 — held-to-maturity securities 33 — 1,373 2,840 37,631 360,821 305,546 708,244 — loans and receivables 1,334 — 120,314 66,092 575,049 177,560 27,251 967,600 Other assets 34,426 18,022 9,858 17,249 36,856 38,535 17,097 172,043

Total assets 550,543 98,001 621,829 378,780 1,760,937 1,396,600 887,206 5,693,896

Liabilities: Borrowings from central bank — — — 23,000 311,500 — — 334,500 Deposits from customers — 1,360,251 578,980 349,436 504,664 142,684 6 2,936,021 Deposits and placements from banks and other financial institutions — 179,365 413,801 525,395 204,071 2,000 — 1,324,632 Financial assets sold under repurchase agreements — — 81,305 11,798 14,287 — — 107,390 Debt securities issued — — 63,989 163,738 102,464 71,851 98,887 500,929 Other liabilities 811 31,968 36,050 16,120 27,118 3,848 2,319 118,234

Total liabilities 811 1,571,584 1,174,125 1,089,487 1,164,104 220,383 101,212 5,321,706

Net position 549,732 (1,473,583) (552,296) (710,707) 596,833 1,176,217 785,994 372,190

Notional amount of derivatives — — 513,820 456,439 809,650 175,491 9,285 1,964,685

(i) For cash and balances with central bank, the indefinite period amount represents statutory deposit reserves and fiscal deposits maintained with the PBOC. For investments represent the balances being impaired or overdue for more than one month. Equity investments are also reported under indefinite period.

(ii) For loans and advances to customers and long-term receivables, the “indefinite” period amount represents the balance being impaired or overdue for more than one month. The balance not impaired and overdue within one month is included in “repayable on demand”. 330 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(iii) Analysis on contractual undiscounted cash flows of non-derivative financial assets and liabilities

The following tables analyse the Group’s and the Bank’s contractual undiscounted cash flows of non-derivative financial assets and liabilities as at the end of the reporting period. The Group manages inherent liquidity risk based on its estimation of expected future cash flows.

Group

2018

More than 5 years Less than 1 to 3 3 to 12 1 to 5 and 1 month months months years indefinite Total

Financial assets: Cash and balances with central bank 52,924 — — — 341,952 394,876 Balances with banks and other financial institutions 40,895 3,934 6,625 640 — 52,094 Placements with banks and other financial institutions 43,503 22,438 160,688 26,321 — 252,950 Financial assets held under resale agreements 36,994 901 1,328 — — 39,223 Loans and advances to customers 594,779 243,854 990,856 1,017,025 877,453 3,723,967 Financial investments 90,021 124,043 612,667 1,015,377 327,245 2,169,353 Long-term receivables 5,831 5,938 29,876 69,709 22,219 133,573 Other financial assets 25,812 7,891 35,733 31,313 77,884 178,633

Total financial assets (expected maturity date) 890,759 408,999 1,837,773 2,160,385 1,646,753 6,944,669

Financial liabilities: Borrowings from central bank 9,141 26,566 274,260 — — 309,967 Deposits from customers 1,991,206 384,774 657,669 189,469 169 3,223,287 Deposits and placements from banks and other financial institutions 466,060 365,093 260,498 3,736 — 1,095,387 Financial assets sold under repurchase agreements 78,879 7,588 1,540 1,777 — 89,784 Borrowings from banks and other financial institutions 17,341 21,209 54,085 19,478 21,601 133,714 Debt securities issued 26,240 175,050 264,013 126,345 134,363 726,011 Other financial liabilities 20,481 4,071 5,901 3,677 661 34,791

Total financial liabilities (contractual maturity date) 2,609,348 984,351 1,517,966 344,482 156,794 5,612,941

331 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(iii) Analysis on contractual undiscounted cash flows of non-derivative financial assets and liabilities (continued)

Group (continued)

2017

More than 5 years Less than 1 to 3 3 to 12 1 to 5 and 1 month months months years indefinite Total

Financial assets: Cash and balances with central bank 33,973 — — — 408,983 442,956 Balances with banks and other financial institutions 69,427 1,942 3,998 — — 75,367 Financial assets at fair value through profit or loss 4,062 5,868 19,632 45,855 4,537 79,954 Placements with banks and other financial institutions 28,506 18,526 94,092 6,071 — 147,195 Financial assets held under resale agreements 40,212 10,055 2,790 — — 53,057 Loans and advances to customers 493,900 263,824 1,005,255 780,893 824,567 3,368,439 Investment securities 131,134 91,274 749,965 812,223 473,839 2,258,435 Long-term receivables 5,454 5,986 24,847 64,485 20,721 121,493 Other financial assets 32,835 20,392 42,754 42,330 83,090 221,401

Total financial assets (expected maturity date) 839,503 417,867 1,943,333 1,751,857 1,815,737 6,768,297

Financial liabilities: Borrowings from central bank — 23,799 318,061 — — 341,860 Deposits from customers 1,951,759 352,758 518,232 156,276 3,379 2,982,404 Deposits and placements from banks and other financial institutions 586,669 528,343 209,353 2,327 — 1,326,692 Financial assets sold under repurchase agreements 81,833 8,741 14,566 49 — 105,189 Borrowings from banks and other financial institutions 16,301 26,317 75,498 20,033 17,032 155,181 Debt securities issued 64,137 165,104 109,034 74,207 139,256 551,738 Other financial liabilities 17,249 3,161 7,108 2,106 4,999 34,623

Total financial liabilities (contractual maturity date) 2,717,948 1,108,223 1,251,852 254,998 164,666 5,497,687

332 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(iii) Analysis on contractual undiscounted cash flows of non-derivative financial assets and liabilities (continued)

Bank

2018

More than 5 years Less than 1 to 3 3 to 12 1 to 5 and 1 month months months years indefinite Total

Financial assets: Cash and balances with central bank 51,367 — — — 339,422 390,789 Balances with banks and other financial institutions 29,486 3,588 4,939 640 — 38,653 Placements with banks and other financial institutions 45,517 27,287 171,825 26,321 — 270,950 Financial assets held under resale agreements 35,156 160 — — — 35,316 Loans and advances to customers 593,130 242,125 981,970 1,014,683 873,926 3,705,834 Financial investments 89,711 122,758 607,191 1,009,600 323,585 2,152,845 Other financial assets 19,991 7,426 31,469 21,819 54,587 135,292

Total financial assets (expected maturity date) 864,358 403,344 1,797,394 2,073,063 1,591,520 6,729,679

Financial liabilities: Borrowings from central bank 9,141 26,516 273,824 — — 309,481 Deposits from customers 1,975,237 382,487 652,686 185,589 36 3,196,035 Deposits and placements from banks and other financial institutions 472,160 364,687 260,996 3,736 — 1,101,579 Financial assets sold under repurchase agreements 77,836 7,588 1,524 1,777 — 88,725 Debt securities issued 26,236 175,024 263,974 120,766 134,343 720,343 Other financial liabilities 11,660 1,954 5,652 2,702 275 22,243

Total financial liabilities (contractual maturity date) 2,572,270 958,256 1,458,656 314,570 134,654 5,438,406

333 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(iii) Analysis on contractual undiscounted cash flows of non-derivative financial assets and liabilities (continued)

Bank (continued)

2017

More than 5 years Less than 1 to 3 3 to 12 1 to 5 and 1 month months months years indefinite Total

Financial assets: Cash and balances with central bank 406,457 — — — 31,632 438,089 Balances with banks and other financial institutions 44,791 3,865 1,526 — — 50,182 Financial assets at fair value through profit or loss 4,062 5,865 19,606 45,337 4,714 79,584 Placements with banks and other financial institutions 28,506 18,526 96,668 6,071 — 149,771 Financial assets held under resale agreements 40,212 7,750 — — — 47,962 Loans and advances to customers 492,070 261,954 996,408 778,542 822,131 3,351,105 Investment securities 131,023 91,206 749,722 811,236 473,160 2,256,347 Other financial assets 27,909 17,499 37,093 38,535 51,523 172,559

Total financial assets (expected maturity date) 1,175,030 406,665 1,901,023 1,679,721 1,383,160 6,545,599

Financial liabilities: Borrowings from central bank — 23,122 318,061 — — 341,183 Deposits from customers 1,939,429 350,766 511,348 153,104 7 2,954,654 Deposits and placements from banks and other financial institutions 593,046 530,235 209,753 2,327 — 1,335,361 Financial assets sold under repurchase agreements 81,805 8,683 14,566 — — 105,054 Debt securities issued 64,137 165,104 109,034 73,088 139,256 550,619 Other financial liabilities 16,994 1,167 6,895 1,581 1,538 28,175

Total financial liabilities (contractual maturity date) 2,695,411 1,079,077 1,169,657 230,100 140,801 5,315,046

334 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(iv) Analysis on contractual undiscounted cash flows of derivatives

a Derivatives settled on a net basis

The Group’s derivatives that will be settled on a net basis include:

— Interest rate derivatives: interest rate swaps;

— Credit derivatives: credit default swaps.

The following tables analyse the Group’s and the Bank’s contractual undiscounted cash flows of derivatives to be settled on a net basis as at the end of the reporting period.

Group

2018

Less than 1 to 3 3 to 12 1 to 5 More than 1 month months months years 5 years Total

Interest rate derivatives (25) (53) (224) (797) (26) (1,125) Credit derivatives — — — 1 — 1

Total (25) (53) (224) (796) (26) (1,124)

2017

Less than 1 to 3 3 to 12 1 to 5 More than 1 month months months years 5 years Total

Interest rate derivatives (5) 5 (4) (17) 10 (11) Credit derivatives — — — 1 — 1

Total (5) 5 (4) (16) 10 (10)

Bank

2018

Less than 1 to 3 3 to 12 1 to 5 More than 1 month months months years 5 years Total

Interest rate derivatives (23) (56) (228) (810) (10) (1,127) Credit derivatives — — — 1 — 1

Total (23) (56) (228) (809) (10) (1,126)

2017

Less than 1 to 3 3 to 12 1 to 5 More than 1 month months months years 5 years Total

Interest rate derivatives (5) 4 (7) (34) — (42) Credit derivatives — — — 1 — 1

Total (5) 4 (7) (33) — (41)

335 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(iv) Analysis on contractual undiscounted cash flows of derivatives (continued)

b Derivatives settled on a gross basis

The Group’s derivatives that will be settled on a gross basis include:

— Foreign exchange derivatives: currency forwards, currency swaps and currency options;

— Precious metal derivatives: precious metal forwards, swaps & options;

— Other derivatives: futures, equity and options derivatives.

The following tables analyse the Group’s and the Bank’s contractual undiscounted cash flows of derivatives to be settled on a gross basis as at the end of the reporting period.

Group

2018

Less than 1 to 3 3 to 12 1 to 5 More than 1 month months months years 5 years Total

Foreign exchange derivatives — Cash outflow (428,247) (386,427) (804,983) (10,788) — (1,630,445) — Cash inflow 427,853 386,064 804,283 10,787 — 1,628,987

Precious metal derivatives — Cash outflow (34,454) (21,620) (136,492) — — (192,566) — Cash inflow 34,598 20,177 80,989 — — 135,764

Others — Cash outflow — — (3,639) — — (3,639) — Cash inflow — — 3,639 — — 3,639

Total cash outflow (462,701) (408,047) (945,114) (10,788) — (1,826,650)

Total cash inflow 462,451 406,241 888,911 10,787 — 1,768,390

2017

Less than 1 to 3 3 to 12 1 to 5 More than 1 month months months years 5 years Total

Foreign exchange derivatives — Cash outflow (434,438) (324,897) (505,028) (9,918) — (1,274,281) — Cash inflow 433,512 321,146 502,733 10,057 — 1,267,448

Precious metal derivatives — Cash outflow (15,286) (23,037) (56,960) — — (95,283) — Cash inflow 12,105 22,128 53,023 — — 87,256

Others — Cash outflow (36) — (18,352) — — (18,388) — Cash inflow 36 27 18,361 — — 18,424

Total cash outflow (449,760) (347,934) (580,340) (9,918) — (1,387,952)

Total cash inflow 445,653 343,301 574,117 10,057 — 1,373,128

336 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(iv) Analysis on contractual undiscounted cash flows of derivatives (continued)

b Derivatives settled on a gross basis (continued)

Bank

2018

Less than 1 to 3 3 to 12 1 to 5 More than 1 month months months years 5 years Total

Foreign exchange derivatives — Cash outflow (428,247) (386,427) (804,983) (10,788) — (1,630,445) — Cash inflow 427,853 386,064 804,283 10,787 — 1,628,987

Precious metal derivatives — Cash outflow (34,454) (21,620) (136,492) — — (192,566) — Cash inflow 34,598 20,177 80,989 — — 135,764

Others — Cash outflow — — (3,639) — — (3,639) — Cash inflow — — 3,639 — — 3,639

Total cash outflow (462,701) (408,047) (945,114) (10,788) — (1,826,650)

Total cash inflow 462,451 406,241 888,911 10,787 — 1,768,390

2017

Less than 1 to 3 3 to 12 1 to 5 More than 1 month months months years 5 years Total

Foreign exchange derivatives — Cash outflow (434,438) (324,897) (505,028) (9,918) — (1,274,281) — Cash inflow 433,512 321,146 502,733 10,057 — 1,267,448

Precious metal derivatives — Cash outflow (15,286) (23,037) (56,960) — — (95,283) — Cash inflow 12,105 22,128 53,023 — — 87,256

Others — Cash outflow (36) — (18,352) — — (18,388) — Cash inflow 36 — 18,361 — — 18,397

Total cash outflow (449,760) (347,934) (580,340) (9,918) — (1,387,952)

Total cash inflow 445,653 343,274 574,117 10,057 — 1,373,101

337 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(v) Analysis on contractual undiscounted cash flows of commitments

Management treats contractual maturity as the best estimate for analysing liquidity risk of off-balance sheet items, unless an objective evidence of default is identified.

Group

2018

Less than 1 to 5 More than 1 year years 5 years Total

Bank acceptances 518,408 — — 518,408 Letters of credit 113,092 115 — 113,207 Guarantees 75,761 58,240 2,863 136,864 Unused credit card commitments 231,054 — — 231,054 Capital commitments 6,559 11,853 — 18,412 Operating lease commitments 3,245 9,516 1,388 14,149 Irrevocable loan commitments 726 1,914 1,348 3,988 Finance lease commitments 2,056 1,137 — 3,193

Total 950,901 82,775 5,599 1,039,275

2017

Less than 1 to 5 More than 1 year years 5 years Total

Bank acceptances 461,630 — — 461,630 Letters of credit 106,766 757 — 107,523 Guarantees 96,631 42,360 2,938 141,929 Unused credit card commitments 100,714 — — 100,714 Capital commitments 4,515 14,601 — 19,116 Operating lease commitments 3,441 8,219 2,343 14,003 Irrevocable loan commitments 680 2,277 1,329 4,286 Finance lease commitments 3,158 2 — 3,160

Total 777,535 68,216 6,610 852,361

338 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(4) Liquidity risk (continued)

(v) Analysis on contractual undiscounted cash flows of commitments (continued)

Bank

2018

Less than 1 to 5 More than 1 year years 5 years Total

Bank acceptances 518,258 — — 518,258 Letters of credit 113,092 115 — 113,207 Guarantees 75,757 58,240 2,863 136,860 Unused credit card commitments 231,054 — — 231,054 Capital commitments 2,126 43 — 2,169 Operating lease commitments 2,958 8,968 1,343 13,269 Irrevocable loan commitments 726 1,914 1,348 3,988

Total 943,971 69,280 5,554 1,018,805

2017

Less than 1 to 5 More than 1 year years 5 years Total

Bank acceptances 461,419 — — 461,419 Letters of credit 106,766 757 — 107,523 Guarantees 96,627 42,360 2,938 141,925 Unused credit card commitments 100,714 — — 100,714 Capital commitments 456 173 — 629 Operating lease commitments 3,342 8,082 2,315 13,739 Irrevocable loan commitments 680 2,277 1,329 4,286

Total 770,004 53,649 6,582 830,235

(5) Operational risk

Operational risk refers to the risk of loss due to deficient and flawed internal procedures, personnel and information technology (“IT”) system, or external events. The operational risk of the Group mainly comprises internal and external fraud, employment system, safety of working places, events related to customers, products and operation, damages of tangible assets, interruption of business, failure of IT system, implementation, delivery and process management.

The Bank continued to promote various operational risk management tasks, including further improving the application of the three major operational risk tools, conducting self-assessment in operational risk and control in key business areas and management areas, organising key risk indicator data reporting and daily monitoring, improving quality and efficiency of reporting of operational risk loss data, improving the operational risk loss database, etc.; performing comprehensive assessment of IT risks of the second line of defence, improving the structure of IT risk management; optimising the outsourcing risk management system, strengthening management of new project approval and outsourcing service providers, organising inspection and evaluation, and building a solid outsourcing risk management platform; further improving the management level of business continuity, optimising and improving the system and key business special emergency plan, performing the cross-branch and cross-department practical exercises, and prioritize a risk scenario where business recovery methods are available when systems are not available.

339 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(6) Country risk

The Group is exposed to country risk which mainly arises from overseas credit business, bond investment, bill business, interbank financing, financial derivative trading, offshore leasing business, investment banking business, securities investment and establishment of overseas institutions.

Country risk management is included in the comprehensive risk management system of the Group and serves the objective of business strategy of the Bank. The Group manages and controls country risk through a number of tools including risk assessment and rating, limit setting, monitoring, improvement to review procedures, and implementation to accrue country risk reserve.

(7) Capital management

In managing capital, the Group aims to ensure compliance with regulatory requirements, continuously improve its ability to mitigate risks and enhance the return on its capital. On this basis, the Group has set its capital adequacy objectives, and taken a range of measures, including budgeting/planning and performance measurement and limit management, to ensure the realisation of management objectives. This helps meet the requirements for regulatory compliance, credit rating, risk compensation and shareholder return; promote the Group’s risk management; ensure an orderly expansion of asset bases; and improve business structures and models.

Capital adequacy and the use of regulatory capital are monitored regularly by the Group’s management based on regulations issued by the CBIRC. The required information is submitted to the CBIRC by the Group and the Bank quarterly.

On 1 January 2013, the Group started computing the capital adequacy ratios in accordance with the Capital Rules for Commercial Banks (Provisional) and other relevant regulations promulgated by the CBIRC.

The CBIRC requires commercial banks to meet the requirements of capital adequacy ratios by the end of 2018 in accordance with the Capital Rules for Commercial Banks (Provisional). For systemically important banks, each bank is required to maintain the core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio not below the minimum of 8.50%, 9.50% and 11.50%, respectively. For non-systemically important banks, the minimum ratios for core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio are 7.50%, 8.50% and 10.50%, respectively. In addition, those individual banking subsidiaries or branches incorporated outside Mainland China are also directly regulated and supervised by their local banking supervisors. There are certain differences in the capital adequacy requirements of different countries.

The on-balance sheet risk-weighted assets are measured using different risk weights, which are determined in accordance with Appendix 2 of the Capital Rules for Commercial Banks (Provisional), taking into account any eligible collateral or guarantees. A similar treatment is adopted for off-balance sheet exposure, with adjustments made to reflect the contingent nature of any potential losses. The counterparty credit risk-weighted assets for OTC derivatives are the summation of default risk-weighted assets and credit value adjustment (“CVA”). Market risk-weighted assets are calculated using the standardised approach. Operational risk-weighted assets are calculated using basic indicator approach.

The Group calculates the following core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio in accordance with the Capital Rules for Commercial Banks (Provisional) and relevant requirements promulgated by the CBIRC. The requirements pursuant to these regulations may have certain differences comparing to those applicable in Hong Kong and other countries.

340 3 FINANCIAL RISK MANAGEMENT (CONTINUED)

(7) Capital management (continued)

The capital adequacy ratios and related components of the Group are calculated in accordance with the statutory financial statements of the Group prepared under Accounting Standards for Business Enterprises (“ASBE”). During the year, the Group has complied in full with all its externally imposed capital requirements.

The Group calculates the core tier-one capital adequacy ratio, tier-one capital adequacy ratio and capital adequacy ratio in accordance with the Capital Rules for Commercial Banks (Provisional) and relevant requirements promulgated by the CBIRC as below:

2018 2017

Core tier-one capital adequacy ratio 8.93% 8.63%

Tier-one capital adequacy ratio 9.16% 8.88%

Capital adequacy ratio 11.75% 11.85%

Components of capital base Core tier-one capital: Share capital 43,782 36,485 Valid portion of capital reserve 57,470 64,753 Surplus reserve 39,911 34,914 General reserve 74,370 74,168 Retained earnings 193,131 163,420 Valid portion of non-controlling interests 6,997 6,750 Others 1,518 (4,662)

Total core tier-one capital 417,179 375,828

Total core tier-one capital 417,179 375,828 Core tier-one capital deductions (1,453) (1,204)

Net core tier-one capital 415,726 374,624 Other tier-one capital 10,824 10,790

Net tier-one capital 426,550 385,414

Tier-two capital: Valid portion of tier-two capital instruments issued and share premium 98,900 98,887 Surplus provision for loan impairment 19,966 28,300 Valid portion of non-controlling interests 1,865 1,800 Tier-two capital deductions — —

Net tier-two capital 120,731 128,987

Net capital base 547,281 514,401

Credit risk-weighted assets 4,281,596 3,998,394

Market risk-weighted assets 95,209 63,112

Operational risk-weighted assets 279,481 278,756

Total risk-weighted assets 4,656,286 4,340,262

341 4 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

In the process of applying the Group’s accounting policies, management has used its judgements and made assumptions of the effects of uncertain future events on the financial statements. The most significant use of judgements and key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are described below. For the significant accounting judgements and estimates regarding IAS 39, see Note 4 “Significant accounting estimates and judgements” to 2017 financial statements.

(1) ECL measurement

For the debt instrument investments measured at amortized cost and at FVOCI, and the loan commitments and financial guarantee contracts not measured at FVTPL, complicated models and a huge amount of assumptions were adopted in the ECL measurement. These models and assumptions relate to the future macroeconomic conditions and the borrowers’ creditworthiness (e.g., the likelihood of default by customers and the corresponding losses). Explanation of inputs, assumptions and estimation techniques of ECL measurement are indicated in Note 3 (2) (iii).

(2) Fair value of derivative and other financial instruments

The Group establishes fair value of financial instruments with reference to quoted market prices in an active market or, if there is no active market, using valuation techniques. These valuation techniques include the use of recent arm’s length transactions, observable prices for similar instruments, discounted cash flow analysis using risk-adjusted interest rates, and commonly used market pricing models. Whenever possible these models use observable market inputs and data including, for example, interest rate yield curves, foreign currency rates and option volatilities. The results of using valuation techniques are calibrated against industry practice and observable current market transactions in the same or similar instruments.

(3) Taxation

In the ordinary course of business, many transactions and calculations involve uncertainties in the ultimate tax determination, and significant estimates are required in determining the provision for value added tax and income tax. The Group recognises liabilities for anticipated tax inspection issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the value added tax, income tax and deferred income tax provisions in the period during which such a determination is made.

(4) Structured entities

When assessing whether to consolidate structured entities, the Group reviews all facts and circumstances to determine whether the Group, as manager, is acting as agent or principal. The Group is deemed to be a principal, and hence controls and consolidates the structured entity, when it acts as manager and cannot be removed without cause, and is able to influence the returns of the structured entities by exercising its power.

342 5 SEGMENT INFORMATION

The Group conducts business activities in different geographical regions and key business lines. The geographical segment can be divided into four regions, including Northern China, Eastern China, Southern China and others. The business segment can be divided into four business lines including corporate banking, retail banking, treasury and others. The Group primarily provides comprehensive financial services through these four business lines.

Segment assets, liabilities, operating gains and losses and capital expenditures are measured in accordance with the Group’s accounting policies and internal management rules. The items of each segment include those which can be directly attributable to the segment or can be assigned to the segment based on reasonable criteria. As part of the management of assets and liabilities, the Group’s capital resources are allocated to various business segments through the Treasury Department of the Head Office. The Group’s internal transfer pricing mechanism uses market interest rates as the benchmark, and determines transfer prices with reference to internal capital pool. The impact of internal trading has been offset when preparing the consolidated statements.

As the management mainly relies on net interest income, net fee and commission income to assess the total income of the Group’s segment business, the interest income and expenses, fee and commission income and expenses for all business segments are presented on a net basis.

Segment assets include all tangible assets, intangible assets, other long-term assets and receivables attributable to each segment, deferred tax assets are excluded. Segment liabilities include all liabilities attributable to each segment, deferred income tax liabilities are excluded.

Operating segments are presented as the following geographical and business segments.

Geographical segments:

(1) Northern China: including the Head Office, branches in Beijing, Taiyuan, Shijiazhuang and Tianjin, Minsheng Financial Leasing Co., Ltd. (“Minsheng Financial Leasing”) and Ningjin Rural Bank.

(2) Eastern China: including branches in Shanghai, Nanjing, Hangzhou, Jinan, Suzhou, China (Shanghai) Pilot Free Trade Zone, Hefei, Qingdao, Ningbo, Wenzhou, Nanchang and Cixi Rural Bank, Songjiang Rural Bank, Jiading Rural Bank, Penglai Rural Bank, Funing Rural Bank, Taicang Rural Bank, Ningguo Rural Bank, Guichi Rural Bank, Tiantai Rural Bank, and Tianchang Rural Bank.

(3) Southern China: including branches in Shenzhen, Guangzhou, Fuzhou, Xiamen, Nanning, Quanzhou, Shantou, Haikou and Minsheng Royal Fund Management Co., Ltd. (“Minsheng Royal Fund”), Anxi Rural Bank, Zhangpu Rural Bank, Xiang’an Rural Bank.

(4) Others: including branches in Hong Kong, Chengdu, Wuhan, Zhengzhou, Chongqing, Xi’an, Dalian, Changsha, Kunming, Guiyang, Hohhot, Shenyang, Changchun, Lanzhou, Urumqi, Lhasa, Harbin, Xining, Yinchuan, and CMBC International Holdings Ltd.(“CMBC International”), Pengzhou Rural Bank, Qijiang Rural Bank, Tongnan Rural Bank, Meihekou Rural Bank, Ziyang Rural Bank, Jiangxia Rural Bank, Changyuan Rural Bank, Yidu Rural Bank, Zhongxiang Rural Bank, Puer Rural Bank, Jinghong Rural Bank, Zhidan Rural Bank, Yuyang Rural Bank, Tengchong Rural Bank, Linzhi Rural Bank.

343 5 SEGMENT INFORMATION (CONTINUED)

Geographical segments: (continued)

Group

2018

Inter- Northern Eastern Southern Other segment China China China locations elimination Total

Operating income 67,922 33,453 26,084 26,702 — 154,161 External net interest income 20,747 19,930 11,384 24,619 — 76,680 Inter-segment net interest (expense)/income (22,175) 11,084 11,936 (845) — —

Net interest income* (1,428) 31,014 23,320 23,774 — 76,680

Fee and commission income 42,350 3,522 3,540 3,272 — 52,684 Fee and commission expense (3,108) (489) (429) (527) — (4,553)

Net fee and commission income 39,242 3,033 3,111 2,745 — 48,131

Net other income 30,108 (594) (347) 183 — 29,350

Operating expenses (20,402) (11,486) (7,062) (10,106) — (49,056) Credit impairment losses (24,743) (7,383) (3,529) (10,619) — (46,274) Other impairment losses (8) (38) — — — (46)

Profit before income tax 22,769 14,546 15,493 5,977 — 58,785

Depreciation and amortisation 4,852 884 515 946 — 7,197 Capital expenditure 6,476 563 148 470 — 7,657

Segment assets 4,806,232 1,328,486 623,629 990,178 (1,784,394) 5,964,131 Deferred income tax assets 30,691

Total assets 5,994,822

Segment liabilities (4,477,209) (1,301,441) (603,671) (965,771) 1,784,394 (5,563,698) Deferred income tax liabilities (123)

Total liabilities (5,563,821)

Credit commitments 358,375 339,055 110,636 198,648 — 1,006,714

* According to the new accounting standard related to financial instruments effective from 1 January 2018, for financial assets measured at fair value through profit or loss, income generated during the holding period is no longer included in interest income.

344 5 SEGMENT INFORMATION (CONTINUED)

Geographical segments: (continued)

Group (continued)

2017

Inter- Northern Eastern Southern Other segment China China China locations elimination Total

Operating income 73,651 25,964 17,761 24,571 — 141,947 External net interest income 58,037 6,418 3,650 18,447 — 86,552 Inter-segment net interest (expense)/income (31,500) 17,043 11,012 3,445 — —

Net interest income 26,537 23,461 14,662 21,892 — 86,552

Fee and commission income 43,620 2,684 5,008 2,756 — 54,068 Fee and commission expense (3,308) (579) (1,904) (535) — (6,326)

Net fee and commission income 40,312 2,105 3,104 2,221 — 47,742

Net other income 6,802 398 (5) 458 — 7,653

Operating expenses (19,536) (10,987) (6,756) (9,966) — (47,245) Impairment losses on assets (14,463) (7,947) (3,652) (8,078) — (34,140)

Profit before income tax 39,652 7,030 7,353 6,527 — 60,562

Depreciation and amortisation 3,049 688 370 687 — 4,794 Capital expenditure 7,979 987 593 793 — 10,352

Segment assets 5,083,940 1,295,906 662,721 941,025 (2,110,668) 5,872,924 Investments in associates — — 21 — — 21 Deferred income tax assets 29,162

Total assets 5,902,086

Segment liabilities (4,781,657) (1,274,839) (644,197) (922,184) 2,110,668 (5,512,209) Deferred income tax liabilities (65)

Total liabilities (5,512,274)

Credit commitments 323,716 236,813 89,067 169,646 — 819,242

345 5 SEGMENT INFORMATION (CONTINUED)

Business segments

(1) Corporate banking — providing banking products and services for corporate customers, government agencies and financial institutions. These products and services include deposits, loans, trust, trade-related products and other credit services and foreign currency business.

(2) Retail banking — providing banking products and services for individual clients and small and micro-enterprises. These products and services include savings deposits, credit and debit cards, micro lending, residential mortgage and consumer credit.

(3) Treasury — including foreign exchange trading, derivatives transactions, money market transactions, precious metal trading. This segment’s operating results include gains and losses from foreign currency translation and the impact of interest-bearing assets and liabilities on internal fund flows and profit and loss.

(4) Others — the Group’s other businesses including the Group’s investments and any other business which cannot form a single reportable segment.

346 5 SEGMENT INFORMATION (CONTINUED)

Business segments: (continued)

Group

2018

Corporate Retail banking banking Treasury Others Total

Operating income 66,272 56,895 26,475 4,519 154,161 Net interest income* 55,700 22,170 (1,846) 656 76,680 Including: inter-segment net interest income/(expense) 9,863 (22,624) 12,320 441 —

Net fee and commission income 10,044 32,974 3,486 1,627 48,131 Including: inter-segment net fee and commission (expense)/income (41) — — 41 —

Net other income 528 1,751 24,835 2,236 29,350

Operating expenses (20,970) (18,018) (8,623) (1,445) (49,056) Credit impairment losses (25,332) (17,019) (1,217) (2,706) (46,274) Other impairment losses (38) — — (8) (46)

Profit before income tax 19,932 21,858 16,635 360 58,785

Depreciation and amortisation 2,770 2,365 1,156 906 7,197 Capital expenditure 1,528 1,305 638 4,186 7,657

Segment assets 1,839,931 1,218,778 2,710,197 195,225 5,964,131 Deferred income tax assets 30,691

Total assets 5,994,822

Segment liabilities (2,589,083) (665,165) (2,151,845) (157,605) (5,563,698) Deferred income tax liabilities (123)

Total liabilities (5,563,821)

Credit commitments 772,467 231,054 — 3,193 1,006,714

347 5 SEGMENT INFORMATION (CONTINUED)

Business segments: (continued)

Group (continued)

2017

Corporate Retail banking banking Treasury Others Total

Operating income 64,396 48,621 23,609 5,321 141,947 Net interest income 50,149 23,521 11,726 1,156 86,552 Including: inter-segment net interest income/(expense) 9,265 (17,901) 8,619 17 —

Net fee and commission income 14,115 25,074 6,773 1,780 47,742 Including: inter-segment net fee and commission (expense)/income (43) — — 43 —

Net other income 132 26 5,110 2,385 7,653

Operating expenses (21,725) (16,485) (7,827) (1,208) (47,245) Impairment losses on assets (15,543) (16,579) (1,204) (814) (34,140)

Profit before income tax 27,128 15,557 14,578 3,299 60,562

Depreciation and amortisation 1,762 1,324 619 1,089 4,794 Capital expenditure 977 735 343 8,297 10,352

Segment assets 1,701,522 1,092,556 2,884,691 194,155 5,872,924 Investments in associates — — — 21 21 Deferred income tax assets 29,162

Total assets 5,902,086

Segment liabilities (2,485,406) (577,068) (2,278,437) (171,298) (5,512,209) Deferred income tax liabilities (65)

Total liabilities (5,512,274)

Credit commitments 715,368 100,714 — 3,160 819,242

348 6 NET INTEREST INCOME

2018 2017

Interest income arising from: — Loans and advances to customers — Corporate loans and advances 86,905 71,542 — Personal loans and advances 55,945 50,576 — Discounted bills 4,537 4,334 — Investment securities 60,987 78,995 — Including: Financial assets at fair value through profit or loss — 2,438 — Placements with banks and other financial Institutions 10,051 6,708 — Long-term receivables 6,733 6,431 — Balances with central bank 5,768 6,870 — Financial assets held under resale agreements 3,321 2,662 — Balances with banks and other financial Institutions 1,100 2,792

Subtotal 235,347 230,910

Interest expense arising from: — Deposits from customers (66,431) (52,244) — Deposits and placements from banks and other financial institutions (48,019) (51,833) — Debt securities issued (23,632) (18,947) — Borrowings from central bank (10,931) (10,005) — Borrowings from banks and other financial institutions and others (6,405) (5,877) — Financial assets sold under repurchase agreements (3,249) (5,452)

Subtotal (158,667) (144,358)

Net interest income 76,680 86,552

Of which: Interest income from impaired financial assets identified 947 832

7 NET FEE AND COMMISSION INCOME

2018 2017

Fee and commission income — Bank card services 28,946 22,009 — Agency services 8,869 11,648 — Trust and other fiduciary services 7,092 13,085 — Settlement services 3,415 3,028 — Credit commitments 2,653 2,493 — Others 1,709 1,805

Subtotal 52,684 54,068

Fee and commission expense (4,553) (6,326)

Net fee and commission income 48,131 47,742

349 8 NET TRADING GAIN

2018 2017

Gain on interest rate instruments 23,499 88 Gain/(loss) on exchange rate instruments 6,210 (2,267) (Loss)/gain on precious metals and other products (5,442) 3,545

Total 24,267 1,366

9 NET GAIN ARISING FROM DISPOSALS OF SECURITIES AND DISCOUNTED BILLS

2018 2017

Net gain arising from disposals of securities 3,197 3,541 Net (loss)/gain arising from disposals of discounted bills (146) 333

Total 3,051 3,874

Gain or loss arising from disposals of discounted bills represents the difference between the discounted interest income unamortised and rediscounted interest cost.

10 OPERATING EXPENSES

2018 2017

Staff costs, including directors’ emoluments — Short-term employee benefits 23,469 22,952 — Post-employment benefits-defined contribution plans 2,413 2,167 Rental and property management expenses 4,101 4,337 Depreciation and amortisation 3,118 3,350 Office expenses 1,444 1,610 Tax and surcharges 1,919 1,484 Business expenses and others 12,592 11,345

Total 49,056 47,245

Auditors’ remuneration included in the operating expenses of the Group for the year ended 31 December 2018 was RMB20 million (for the year ended 31 December 2017: RMB17 million).

350 11 IMPAIRMENT LOSSES ON ASSETS

2017

Loans and advances to customers 32,180 Investment securities — loans and receivables 634 — available-for-sale securities 488 — held-to-maturity securities (20) Long-term receivables 449 Placements with banks and other financial institutions 68 Others 341

Total 34,140

12 CREDIT IMPAIRMENT LOSSES

2018

Loans and advances to customers 43,611 Financial investments — Financial assets measured at amortised cost 1,475 — Financial assets at fair value through other comprehensive income 747 Long-term receivables 631 Credit loss of off-balance-sheet assets (869) Others 679

Total 46,274

351 13 DIRECTORS AND SUPERVISORS’ EMOLUMENTS

For the year ended 31 December 2018 (in thousands of RMB)

2018

Basic salaries, Contributions allowances and to pension Discretionary benefits schemes bonus Total

Hong Qi(1) (2) 4,168 303 — 4,471 Zhang Hongwei 930 — — 930 Lu Zhiqiang 915 — — 915 Liu Yonghao 930 — — 930 Zheng Wanchun(1) (2) 3,807 303 — 4,110 Shi Yuzhu 775 — — 775 Wu Di 870 — — 870 Song Chunfeng — — — — Weng Zhenjie — — — — Liu Jipeng 880 — — 880 Li Hancheng 920 — — 920 Xie Zhichun 890 — — 890 Peng Xuefeng 875 — — 875 Liu Ningyu 955 — — 955 Tian Suning 410 — — 410 Zhang Juntong(1) (2) 3,674 227 — 3,901 Wang Jiazhi(1) (2) 3,640 227 — 3,867 Guo Dong(1) (2) 2,852 193 — 3,045 Wang Hang 725 — — 725 Zhang Bo 670 — — 670 Lu Zhongnan 725 — — 725 Wang Yugui 765 — — 765 Bao Jiming 665 — — 665 Liang Yutang(1) (2) 2,759 199 — 2,958 Yao Dafeng 505 — — 505 Tian Zhiping — — — — Cheng Hoi-chuen 485 — — 485 Cheng Guoqi 395 — — 395

(1) The Bank defers part of the performance-based compensations to the Executive Directors, the Chairman and Vice Chairman of the Supervisory Board, which are not included in the above disclosure. For details of the deferred payments, please refer to Note 48.

(2) The emoluments before tax of Executive Directors, the Chairman and Vice Chairman of the Supervisory Board are pending for the approval of the Compensation and Remuneration Committee of the Board of Directors, the Bank will make further disclosure upon approval. The amount of the emoluments not accrued is not expected to have a significant impact on the Group’s and the Bank’s 2018 financial statements.

352 13 DIRECTORS AND SUPERVISORS’ EMOLUMENTS (CONTINUED)

For the year ended 31 December 2017 (in thousands of RMB)

2017

Basic salaries, Contributions allowances and to pension Discretionary benefits schemes bonus Total

Hong Qi(1) (2) 3,762 303 3,201 7,266 Zhang Hongwei 915 — — 915 Lu Zhiqiang 890 — — 890 Liu Yonghao 900 — — 900 Liang Yutang(1) (2) 3,301 256 2,820 6,377 Zheng Wanchun(1) (2) 3,408 297 3,184 6,889 Shi Yuzhu 600 — — 600 Wu Di 800 — — 800 Yao Dafeng 820 — — 820 Song Chunfeng — — — — Tian Zhiping — — — — Weng Zhenjie — — — — Cheng Hoi-chuen 880 — — 880 Liu Jipeng 865 — — 865 Li Hancheng 950 — — 950 Xie Zhichun 990 — — 990 Peng Xuefeng 680 — — 680 Liu Ningyu 810 — — 810 Zhang Juntong(1) (2) 2,727 227 2,141 5,095 Wang Jiazhi(1) (2) 3,298 227 1,631 5,156 Guo Dong(1) (2) 2,522 189 1,289 4,000 Wang Hang 735 — — 735 Zhang Bo 545 — — 545 Lu Zhongnan 715 — — 715 Wang Yugui 715 — — 715 Bao Jiming 530 — — 530 Cheng Guoqi 590 — — 590 Wang Junhui 135 — — 135 Guo Guangchang 130 — — 130 Wang Lihua 290 — — 290 Han Jianmin 180 — — 180 Duan Qingshan(1) (2) 610 38 168 816 Zhang Disheng 120 — — 120 Zhang Ke 125 — — 125 Wang Liang 115 — — 115

(2) The emoluments before tax of Executive Directors, the Chairman and Vice Chairman of the Supervisory Board were approved by the Compensation and Remuneration Committee of the Board of Directors. The Bank made further disclosure in the Supplementary Announcement Regarding the Senior Management’s Emoluments of China Minsheng Banking Corp., Ltd. of 2017, and the related emoluments were restated accordingly.

For the year ended 31 December 2018, the five individuals with the highest emoluments are directors or supervisors whose emoluments are disclosed above.

The Group had not paid any emoluments to the directors or supervisors or any of the five highest-paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

353 14 INCOME TAX EXPENSE

2018 2017

Current tax for the year 8,157 14,764 Adjustment for prior years (107) (110)

Subtotal 8,050 14,654

Changes in deferred tax (Note 25) 405 (5,014)

Total 8,455 9,640

Reconciliation between income tax expense and accounting profit of the Group is listed as follows:

Note 2018 2017

Profit before income tax 58,785 60,562

Income tax at the tax rate of 25% 14,696 15,141 Effect of non-taxable income (i) (6,747) (5,874) Effect of non-deductible expenses 466 441 Others 40 (68)

Income tax expense 8,455 9,640

(i) The non-taxable income mainly represents interest income arising from PRC government bonds and municipal bonds, which are exempted from income tax.

The applicable income tax rate for mainland China was 25% for the year ended 31 December 2018 (for the year ended 31 December 2017: 25%). The applicable income tax rate for Hong Kong branch and CMBC International was 16.5% (for the year ended 31 December 2017: 16.5%).

15 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to ordinary equity shareholders of the Bank by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share is calculated by dividing the adjusted profit attributable to ordinary equity shareholders of the Bank for the period by the adjusted weighted average number of ordinary shares in issue. There’s no dilutive potential shares during 2018 and 2017.

2018 2017

Net profit attributable to equity shareholders of the Bank 50,327 49,813 Less: Profit for the year attributable to other equity holders of the Bank (550) (523)

Net profit attributable to ordinary equity shareholders of the Bank 49,777 49,290 Weighted average number of ordinary shares in issue (in millions) 43,782 43,782

Basic/diluted earnings per share (in RMB) 1.14 1.13

In 2018, the Bank implemented the 2017 equity distribution plan to convert capital reserve to share capital. Therefore, the earnings per share for each reporting period are recalculated according to the adjusted number of shares.

354 16 CASH AND BALANCES WITH CENTRAL BANK

Group Bank

2018 2017 2018 2017

Cash 6,984 8,080 6,816 7,844

Balances with central bank Statutory deposit reserves 334,453 407,340 332,165 404,814 Surplus deposit reserves 45,814 25,893 44,232 23,788 Fiscal deposits and others 1,877 1,625 1,877 1,625

Subtotal 382,144 434,858 378,274 430,227

Interest accrued 153 — 149 —

Total 389,281 442,938 385,239 438,071

The Group places statutory deposit reserves with the PBOC or local regulator. The statutory deposit reserves are not available for use in the Group’s daily business.

As at 31 December 2018 the statutory deposit reserve rate applicable to domestic branches of the Bank for RMB deposits was 11.0% and the reserve rate for foreign currency deposits was 5.0% (31 December 2017: 15.0% of RMB deposits and 5.0% of foreign currency deposits). The amount of statutory deposit reserves of the subsidiaries and overseas branches of the Group are determined by local jurisdiction.

Surplus deposit reserves maintained with the PBOC is for the purposes of clearing interbank transactions.

17 BALANCES WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

Group Bank

2018 2017 2018 2017

Mainland China — Banks 25,564 41,682 14,413 19,666 — Other financial institutions 7,442 7,644 7,437 7,644

— Subtotal 33,006 49,326 21,850 27,310

Overseas — Banks 18,516 25,205 16,337 22,119 — Other financial institutions 533 726 343 720

— Subtotal 19,049 25,931 16,680 22,839

Interest accrued 203 — 163 — Less: allowance for impairment losses (104) — (5) —

Total 52,154 75,257 38,688 50,149

355 18 DERIVATIVES

A derivative is a financial instrument, the value of which changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other similar variables. The Group uses derivative financial instrument mainly including forwards, swaps and options.

The notional amount of a derivative represents the amount of an underlying asset upon which the value of the derivative is based. It indicates the volume of business transacted by the Group but does not reflect the risk.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in any orderly transaction between market participates at measured date.

The notional amount and fair value of unexpired derivative financial instruments held by the Group and the Bank are set out in the following tables:

Group

2018

Fair value Notional amount Assets Liabilities

Interest rate swaps 1,620,687 1,807 (461) Currency swaps 1,406,375 15,092 (13,847) Currency options 166,808 1,171 (1,139) Precious metal derivatives 122,197 14,080 (1,934) Currency forwards 66,739 343 (614) Extension options 5,000 — — Commodity options 3,700 596 (3) Credit derivatives 137 3 — Others 590 20 (2)

Total 33,112 (18,000)

2017

Fair value Notional amount Assets Liabilities

Currency swaps 1,129,297 10,304 (14,952) Interest rate swaps 596,828 1,050 (315) Precious metal derivatives 93,805 5,540 (868) Currency options 72,787 375 (307) Currency forwards 51,421 619 (1,062) Commodity options 17,199 789 (554) Extension options 5,000 — — Credit derivatives 131 4 — Others 304 53 (18)

Total 18,734 (18,076)

356 18 DERIVATIVES (CONTINUED)

Bank

2018

Fair value Notional amount Assets Liabilities

Interest rate swaps 1,612,912 1,702 (456) Currency swaps 1,406,375 15,092 (13,847) Currency options 166,808 1,171 (1,139) Precious metal derivatives 122,197 14,080 (1,934) Currency forwards 66,739 343 (614) Extension options 5,000 — — Commodity options 3,700 596 (3) Credit derivatives 137 3 — Others 590 20 (2)

Total 33,007 (17,995)

2017

Fair value Notional amount Assets Liabilities

Currency swaps 1,129,297 10,304 (14,952) Interest rate swaps 594,741 1,039 (296) Precious metal derivatives 93,805 5,540 (868) Currency options 72,787 375 (307) Currency forwards 51,421 619 (1,062) Commodity options 17,199 789 (554) Extension options 5,000 — — Credit derivatives 131 4 — Others 304 26 (18)

Total 18,696 (18,057)

Cash flow hedges

The Group’s cash flow hedges consist of currency swap contracts that are used to hedge against exposures to variability of future cash flows.

Among the above derivative financial instruments, those designated as hedging instruments in cash flow hedges are set out below.

357 18 DERIVATIVES (CONTINUED)

Group and Bank

2018

Fair value Notional amount Assets Liabilities

Currency swap 6,478 60 (7)

Total 60 (7)

2017

Fair value Notional amount Assets Liabilities

Currency swap 3,371 109 —

Total 109 —

Credit risk weighted amount

Group

2018 2017

Precious metal contracts 14,588 3,818 Exchange rate contracts 8,274 4,994 Interest rate contracts 1,633 585 Commodity option contracts 966 2,510 Other derivative contracts 76 45

Total 25,537 11,952

Bank

2018 2017

Precious metal contracts 14,588 3,818 Exchange rate contracts 8,274 4,994 Interest rate contracts 1,566 577 Commodity option contracts 966 2,510 Other derivative contracts 76 18

Total 25,470 11,917

The credit risk weighted amount represents the counterparty credit risk associated with derivative transactions and is calculated with reference to the guidelines issued by the CBIRC. The amount calculated is dependent on, among other factors, the credit worthiness of the counterparty and the maturity characteristics of each type of contract.

The credit risk weighted amounts stated above have taken the effects of netting arrangements into account.

358 19 PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

Group Bank

2018 2017 2018 2017

Mainland China — Banks 16,041 6,060 16,041 6,060 — Other financial institutions 188,590 112,497 198,891 114,997

Overseas — Banks 39,357 21,295 39,357 21,295 — Other financial institutions 2,105 3,448 9,487 3,448

Interest accrued 635 — 682 — Less: Allowance for impairment losses (203) (95) (203) (95)

Total 246,525 143,205 264,255 145,705

20 FINANCIAL ASSETS HELD UNDER RESALE AGREEMENTS

Group Bank

2018 2017 2018 2017

Bonds 33,239 46,751 33,141 46,751 Discounted bills 2,110 704 2,110 704 Others* 3,595 5,357 — 400

Subtotal 38,944 52,812 35,251 47,855

Interest accrued 251 — 38 — Less: allowance for impairment losses (5) — (5) —

Net balance 39,190 52,812 35,284 47,855

* Others mainly represent financial assets held under resale agreements of which the underlying assets were the beneficiary rights of trusts, beneficiary oriented asset management or finance lease receivables.

359 21 LOANS AND ADVANCES TO CUSTOMERS

Group Bank

2018 2017 2018 2017

Measured at amortised cost: Corporate loans and advances — Corporate loans 1,727,890 1,615,830 1,724,931 1,617,816 — Discounted bills — 82,650 — 81,880

1,727,890 1,698,480 1,724,931 1,699,696

Personal loans and advances — Micro lending * 415,564 373,262 406,938 359,147 — Residential mortgage 335,502 350,986 332,912 349,073 — Credit cards 393,249 294,019 393,249 294,019 — Others 86,230 87,560 84,795 86,679

1,230,545 1,105,827 1,217,894 1,088,918

Less: allowance for impairment losses of loans and advances to customers measured at amortised cost (71,216) (74,519) (70,294) (73,657)

Subtotal 2,887,219 2,729,788 2,872,531 2,714,957

Measured at amortised cost: Corporate loans and advances — Corporate loans 1,788 — 1,788 — — Discounted bills 96,523 — 96,116 —

Subtotal 98,311 — 97,904 —

Interest accrued 22,742 — 22,711 —

Net balance 3,008,272 2,729,788 2,993,146 2,714,957

* Micro lending is a loan product offered to the small and micro enterprise owners and proprietors.

360 21 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(1) Loans and advances to customers (interest accrued excluded) analysed by industries

Group Bank 2018 2017 2018 2017 Amount (%) Amount (%) Amount (%) Amount (%)

Corporate loans and advances Real estate 387,942 12.69 256,127 9.13 387,934 12.76 256,127 9.18 Leasing and commercial services 344,669 11.28 275,289 9.82 343,848 11.31 275,259 9.87 Manufacturing 305,767 10.00 335,206 11.95 303,286 9.97 334,625 12.00 Wholesale and retail 185,485 6.07 221,770 7.91 184,538 6.07 221,499 7.94 Mining 117,374 3.84 125,949 4.49 117,347 3.86 125,942 4.52 Water, environment and public utilities management 101,924 3.33 89,079 3.18 101,705 3.34 89,061 3.19 Construction 94,069 3.08 75,924 2.71 93,643 3.08 75,841 2.72 Financial services 85,139 2.79 103,672 3.70 88,136 2.90 106,176 3.81 Transportation, storage and postal service 69,469 2.27 81,176 2.89 69,339 2.28 81,153 2.91 Production and supply of electric power, heat, gas and water 48,948 1.60 52,021 1.86 48,847 1.61 51,988 1.86 Agriculture, forestry, animal husbandry and fishery 13,916 0.46 10,788 0.38 13,457 0.44 10,688 0.38 Accommodation and catering 10,079 0.33 7,494 0.27 9,978 0.33 7,494 0.27 Public administration, social security and social organisations 7,379 0.24 10,284 0.37 7,369 0.24 10,284 0.37 Others 54,041 1.76 53,701 1.91 53,408 1.76 53,559 1.93

Subtotal 1,826,201 59.74 1,698,480 60.57 1,822,835 59.95 1,699,696 60.95

Personal loans and advances 1,230,545 40.26 1,105,827 39.43 1,217,894 40.05 1,088,918 39.05

Total 3,056,746 100.00 2,804,307 100.00 3,040,729 100.00 2,788,614 100.00

(2) Loans and advances to customers (interest accrued excluded) analysed by types of collateral

Group Bank 2018 2017 2018 2017 Amount (%) Amount (%) Amount (%) Amount (%)

Unsecured loans 725,263 23.72 678,023 24.18 727,910 23.93 680,107 24.39 Guaranteed loans 627,501 20.53 632,828 22.57 621,699 20.45 626,416 22.46 Loans secured by — tangible assets other than monetary assets 1,307,324 42.77 1,134,722 40.46 1,295,583 42.61 1,125,154 40.35 — monetary assets 396,658 12.98 358,734 12.79 395,537 13.01 356,937 12.80

Total 3,056,746 100.00 2,804,307 100.00 3,040,729 100.00 2,788,614 100.00

361 21 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(3) Overdue loans (interest accrued excluded) analysed by overdue period

Group

2018

Less than 3 to 12 1 to 3 More than 3 months months years 3 years Total

Unsecured loans 6,393 7,009 3,888 170 17,460 Guaranteed loans 12,285 12,111 7,522 2,732 34,650 Loans secured by — tangible assets other than monetary assets 6,937 7,121 5,565 2,720 22,343 — monetary assets 1,454 771 1,912 539 4,676

Total 27,069 27,012 18,887 6,161 79,129

% of total loans and advances 0.89% 0.88% 0.62% 0.20% 2.59%

2017

Less than 3 to 12 1 to 3 More than 3 months months years 3 years Total

Unsecured loans 5,731 5,287 3,098 69 14,185 Guaranteed loans 11,260 12,768 15,207 1,294 40,529 Loans secured by — tangible assets other than monetary assets 4,860 6,846 12,613 1,562 25,881 — monetary assets 2,204 1,842 3,970 506 8,522

Total 24,055 26,743 34,888 3,431 89,117

% of total loans and advances 0.87% 0.95% 1.24% 0.12% 3.18%

362 21 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(3) Overdue loans (interest accrued excluded) analysed by overdue period (continued)

Bank

2018

Less than 3 to 12 1 to 3 More than 3 months months years 3 years Total

Unsecured loans 6,391 7,008 3,877 170 17,446 Guaranteed loans 12,207 11,915 7,378 2,684 34,184 Loans secured by — tangible assets other than monetary assets 6,850 7,051 5,359 2,686 21,946 — monetary assets 1,451 721 1,898 539 4,609

Total 26,899 26,695 18,512 6,079 78,185

% of total loans and advances 0.88% 0.88% 0.61% 0.20% 2.57%

2017

Less than 3 to 12 1 to 3 More than 3 months months years 3 years Total

Unsecured loans 5,729 5,286 3,098 69 14,182 Guaranteed loans 11,132 12,684 15,001 1,254 40,071 Loans secured by — tangible assets other than monetary assets 4,733 6,742 12,378 1,526 25,379 — monetary assets 2,117 1,840 3,953 506 8,416

Total 23,711 26,552 34,430 3,355 88,048

% of total loans and advances 0.86% 0.95% 1.23% 0.12% 3.16%

Overdue loans represent loans of which the whole or part of the principal or interest are overdue for 1 day or more.

363 21 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(4) Changes in allowance for impairment losses:

As at 31 December 2018, changes in allowance for impairment losses of loans and advances to customers are as follows:

(i) Changes in allowance for impairment losses of loans and advances to customers measured at amortised cost are as follows:

Group

Allowance for impairment losses

As at 31 December 2017 (74,519) Changes in accounting policies (10,631)

As at 1 January 2018 (85,150)

Group

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (23,398) (25,111) (36,641) (85,150) Transfer: — to 12-month ECL (3,313) 3,110 203 — — to lifetime ECL not credit-impaired 1,036 (1,381) 345 — — to lifetime ECL credit-impaired 646 2,502 (3,148) — Reverse/(charge) 6,115 (349) (49,045) (43,279) Write-offs — — 58,421 58,421 Recoveries of amounts previously written off — — (1,914) (1,914) Unwinding of discount — — 947 947 Exchange difference and other movements — — (241) (241)

Balance at 31 December 2018 (18,914) (21,229) (31,073) (71,216)

Bank

Allowance for impairment losses

As at 31 December 2017 (73,657) Changes in accounting policies (10,629)

As at 1 January 2018 (84,286)

364 21 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(4) Changes in allowance for impairment losses: (continued)

(i) Changes in allowance for impairment losses of loans and advances to customers measured at amortised cost are as follows: (continued)

Bank

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (23,010) (24,970) (36,306) (84,286) Transfer: — to 12-month ECL (3,310) 3,107 203 — — to lifetime ECL not credit-impaired 1,031 (1,376) 345 — — to lifetime ECL credit-impaired 643 2,469 (3,112) — Reverse /(charge) 6,140 (283) (48,600) (42,743) Write-offs — — 57,918 57,918 Recoveries of amounts previously written off — — (1,889) (1,889) Unwinding of discount — — 947 947 Exchange difference and other movements — — (241) (241)

Balance at 31 December 2018 (18,506) (21,053) (30,735) (70,294)

(ii) Changes in allowance for impairment losses of loans and advances to customers at fair value through other comprehensive income are as follows:

Group

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (295) — (365) (660) Transfer: — to 12-month ECL — — — — — to lifetime ECL not credit-impaired — — — — — to lifetime ECL credit-impaired — — — — Charge (154) — (178) (332)

Balance at 31 December 2018 (449) — (543) (992)

Bank

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (273) — (365) (638) Transfer: — to 12-month ECL — — — — — to lifetime ECL not credit-impaired — — — — — to lifetime ECL credit-impaired — — — — Charge (163) — (178) (341)

Balance at 31 December 2018 (436) — (543) (979)

365 21 LOANS AND ADVANCES TO CUSTOMERS (CONTINUED)

(4) Changes in allowance for impairment losses: (continued)

As at 31 December 2017, changes in allowance for impairment losses of loans and advances to customers are as follows:

Group

2017

Corporate loans and Personal loans advances and advances Total

Individual Collective Collective assessment assessment assessment

At 1 January (11,142) (28,446) (24,806) (64,394) Charge for the year (10,604) (6,904) (16,673) (34,181) Release during the year 1,901 100 — 2,001 Reclassification (2,055) 2,055 — — Transfer out 2,391 — 1,968 4,359 Write-offs 6,362 — 12,077 18,439 Recoveries (1,015) — (758) (1,773) Unwinding of discount 487 — 345 832 Exchange difference — 198 — 198

At 31 December (13,675) (32,997) (27,847) (74,519)

Bank

2017

Corporate loans and Personal loans advances and advances Total

Individual Collective Collective assessment assessment assessment

At 1 January (11,099) (28,306) (24,270) (63,675) Charge for the year (10,604) (6,904) (16,333) (33,841) Release during the year 1,878 — — 1,878 Reclassification (2,055) 2,055 — — Transfer out 2,391 — 1,957 4,348 Write-offs 6,330 — 12,018 18,348 Recoveries (1,003) — (742) (1,745) Unwinding of discount 487 — 345 832 Exchange difference — 198 — 198

At 31 December (13,675) (32,957) (27,025) (73,657)

366 22 FINANCIAL INVESTMENTS

Group Bank

Note 2018 2017 2018 2017

Financial assets at fair value through profit or loss (1) 381,093 74,601 378,301 71,957 Financial assets at fair value through other comprehensive income (2) 461,693 — 456,904 — Financial assets measured at amortised cost (3) 1,127,231 — 1,119,177 — Available-for-sale securities (4) — 378,889 — 377,315 Held-to-maturity securities (5) — 708,244 — 708,244 Loans and receivables (6) — 974,163 — 967,600

Total 1,970,017 2,135,897 1,954,382 2,125,116

(1) Financial assets at fair value through profit or loss

Group Bank

2018 2017 2018 2017

Held for trading purpose Debt securities Government — listed outside Hong Kong 2,163 1,565 2,163 1,565 Policy banks — listed in Hong Kong 653 65 653 65 — listed outside Hong Kong 2,714 1,064 2,714 1,064 Banking and non-banking financial institution — listed in Hong Kong 4,214 8,479 4,214 8,479 — listed outside Hong Kong 3,384 10,695 3,384 10,631 — unlisted 4,530 — 4,530 — Other corporates — listed in Hong Kong 18,102 10,791 18,102 10,433 — listed outside Hong Kong 48,622 29,630 48,622 29,555 — unlisted 6,812 — 6,812 — Equity investments — listed in Hong Kong 4,455 532 4,455 529 — unlisted — 531 — — Investment funds — unlisted 44,092 1,314 42,851 —

Subtotal 139,741 64,666 138,500 62,321

Designated at fair value through profit or loss Debt securities Banking and non-banking financial institution — unlisted — 3,633 — 3,633 Other corporates — unlisted — 3,642 — 3,571 Investment funds — unlisted — 2,660 — 2,432

Subtotal — 9,935 — 9,636

367 22 FINANCIAL INVESTMENTS (CONTINUED)

(1) Financial assets at fair value through profit or loss (continued)

Group Bank

2018 2017 2018 2017

Other financial assets at fair value through profit or loss Debt securities Other corporates — unlisted 277 — 179 — Equity investments — listed in Hong Kong 3,133 — 3,131 — — listed outside Hong Kong 1,975 — 1,403 — — unlisted 3,938 — 3,089 — Investment funds — unlisted 12,767 — 12,767 — Asset management plans — unlisted 160,391 — 160,361 — Wealth management products — unlisted 58,871 — 58,871 —

Subtotal 241,352 — 239,801 —

Total 381,093 74,601 378,301 71,957

The financial statements classified debt securities traded on China Domestic Interbank Bond Market as listed bonds.

(2) Financial assets at fair value through other comprehensive income

2018

Group Bank

Debt securities Government — listed in Hong Kong 18 18 — listed outside Hong Kong 86,915 86,915 — unlisted 4,945 3,732 Policy banks — listed in Hong Kong 106 106 — listed outside Hong Kong 40,050 39,621 Banking and non-banking financial institution — listed in Hong Kong 26,859 26,859 — listed outside Hong Kong 145,047 144,666 — unlisted 27,132 26,691 Other corporates — listed in Hong Kong 19,773 19,514 — listed outside Hong Kong 93,242 93,242 — unlisted 12,928 10,919

Subtotal 457,015 452,283

Equity investments (Note (i)) — unlisted 625 625

Interest accrued 4,053 3,996

Total 461,693 456,904

368 22 FINANCIAL INVESTMENTS (CONTINUED)

(2) Financial assets at fair value through other comprehensive income (continued)

(i) The Group designates non-trading equity investments as financial assets at fair value through other comprehensive income. During the reporting period, dividend income of RMB21 million recognised for such equity investments was included in the profit or loss.

(ii) Changes in allowance for impairment losses of financial assets at fair value through other comprehensive income are as follows:

Group

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (675) — (72) (747) Transfer: — to 12-month ECL — — — — — to lifetime ECL not credit-impaired — — — — — to lifetime ECL credit-impaired — — — — Charge (622) — (125) (747) Exchange difference and other movements (13) — — (13)

Balance at 31 December 2018 (1,310) — (197) (1,507)

Bank

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (664) — (72) (736) Transfer: — to 12-month ECL — — — — — to lifetime ECL not credit-impaired — — — — — to lifetime ECL credit-impaired — — — — Charge (614) — (125) (739) Exchange difference and other movements (10) — — (10)

Balance at 31 December 2018 (1,288) — (197) (1,485)

Allowance for impairment losses on financial assets at fair value through other comprehensive income is recognised in other comprehensive income, and any impairment loss or gain is recognised in the profit or loss without decreasing the carrying amount of financial assets presented in the balance sheet. As at 31 December 2018, the financial assets at fair value through other comprehensive income included credit-impaired financial assets whose carrying amount was RMB 225 million, with impairment provision of RMB 197 million recognised during the year.

369 22 FINANCIAL INVESTMENTS (CONTINUED)

(3) Financial assets measured at amortised cost

2018

Group Bank

Bond Government — listed outside Hong Kong 727,868 727,868 Policy banks — listed outside Hong Kong 14,729 14,729 Banking and non-banking financial institution — listed in Hong Kong 4,427 4,427 — listed outside Hong Kong 23,788 23,788 — unlisted 69,622 69,622 Other corporates — listed in Hong Kong 3,232 2,203 — listed outside Hong Kong 7,508 7,508 — unlisted 6,564 70 Asset management plans — unlisted 146,707 146,048 Trust beneficiary rights — unlisted 111,737 111,737

Subtotal 1,116,182 1,108,000

Interest accrued 14,108 14,102 Less: allowance for impairment losses (Note (i)) (3,059) (2,925)

Net value 1,127,231 1,119,177

370 22 FINANCIAL INVESTMENTS (CONTINUED)

(3) Financial assets measured at amortised cost (continued)

(i) Changes in allowance for impairment losses of financial assets measured at amortised cost are as follows:

Group

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (1,837) (50) (466) (2,353) Transfer: — to 12-month ECL (30) 30 — — — to lifetime ECL not credit-impaired 12 (12) — — — to lifetime ECL credit-impaired 15 20 (35) — Reverse/(charge) 477 (192) (1,760) (1,475) Transfer out 16 — 770 786 Exchange difference and other movements (5) — (12) (17)

Balance at 31 December 2018 (1,352) (204) (1,503) (3,059)

Bank

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (1,803) — (466) (2,269) Transfer: — to 12-month ECL — — — — — to lifetime ECL not credit-impaired 12 (12) — — — to lifetime ECL credit-impaired 14 — (14) — Reverse/(charge) 437 (192) (916) (671) Transfer out 16 — — 16 Exchange difference and other movements (1) — — (1)

Balance at 31 December 2018 (1,325) (204) (1,396) (2,925)

371 22 FINANCIAL INVESTMENTS (CONTINUED)

(4) Available-for-sale securities

2017

Group Bank

Debt securities at fair value Government — listed in Hong Kong 18 18 — listed outside Hong Kong 93,019 93,019 — unlisted 835 835 Policy banks — listed in Hong Kong 337 337 — listed outside Hong Kong 34,183 34,183 Banking and non-banking financial institution — listed in Hong Kong 25,073 25,073 — listed outside Hong Kong 91,701 91,701 — unlisted 26,445 26,445 Other corporates — listed in Hong Kong 7,613 7,468 — listed outside Hong Kong 39,409 38,607 — unlisted 3,861 3,733 Less: allowance for impairment losses (Note (i)) (495) (455)

Subtotal 321,999 320,964

Equity investments — listed in Hong Kong 62 62 — listed outside Hong Kong 1,732 1,275 — unlisted 4,776 4,750

Less: allowance for impairment losses (Note (i)) (932) (932)

Subtotal 5,638 5,155

Investment Funds — unlisted 51,252 51,196

Total 378,889 377,315

372 22 FINANCIAL INVESTMENTS (CONTINUED)

(4) Available-for-sale securities (continued)

The book value of the Group’s impaired available-for-sale financial assets amounted to RMB1,614 million as at 31 December 2017 and the provision amounted to RMB1,314 million.

The book value of the Bank’s impaired available-for-sale financial assets amounted to RMB1,488 million as at 31 December 2017 and the provision amounted to RMB1,274 million.

The Group did not reclassify any available-for-sale securities in 2017.

(i) Changes in allowance for impairment losses of available-for-sale financial assets are as follows:

Group

2017

Available-for-sale Available-for-sale debt equity instruments instruments Total

At 1 January (394) (564) (958) Charge for the year (148) (368) (516) Release during the year 28 — 28 Exchange difference 19 — 19

At 31 December (495) (932) (1,427)

Bank

2017

Available-for-sale Available-for-sale debt equity instruments instruments Total

At 1 January (389) (564) (953) Charge for the year (113) (368) (481) Release during the year 28 — 28 Exchange difference 19 — 19

At 31 December (455) (932) (1,387)

373 22 FINANCIAL INVESTMENTS (CONTINUED)

(5) Held-to-maturity securities

Group and Bank

2017

Government — listed outside Hong Kong 651,129 Policy banks — listed outside Hong Kong 19,760 Banking and non-banking financial institution — listed in Hong Kong 4,405 — listed outside Hong Kong 27,468 — unlisted 2,353 Other corporates — listed in Hong Kong 2,171 — listed outside Hong Kong 874 — unlisted 146 Less: allowance for impairment losses (Note (i)) (62)

Total 708,244

Fair value of securities 679,333

During the year of 2017, the Group reclassified held-to-maturity debt securities with a total par value of RMB13,395 million to available-for-sale debt securities. The aggregate amount of these held-to-maturity securities reclassified was insignificant relative to the total amount of the Group’s held-to-maturity securities.

(i) Changes in allowance for impairment losses of held-to-maturity securities are as follows:

Group and Bank

2017

At 1 January (82) Release during the year 20

At 31 December (62)

374 22 FINANCIAL INVESTMENTS (CONTINUED)

(6) Loans and receivables

2017

Group Bank

Bond Government — unlisted 60,788 60,094 Policy banks — listed outside Hong Kong 500 500 Banking and non-banking financial institution — listed outside Hong Kong 6,793 6,787 — unlisted 129,567 129,089 Other corporates — listed outside Hong Kong 6,835 6,232 — unlisted 25,035 20,884 Asset management plans — unlisted 670,774 670,074 Trust beneficiary rights — unlisted 76,137 76,137

Total 976,429 969,797

Less: allowance for impairment losses (Note (i)) (2,266) (2,197)

Net value 974,163 967,600

(i) Changes in allowance for impairment losses of loans and receivables are as follows:

2017

Group Bank

At 1 January (1,688) (1,614) Charge for the year (772) (701) Release during the year 138 64 Write-offs 52 52 Exchange difference 4 2

At 31 December (2,266) (2,197)

23 LONG-TERM RECEIVABLES

Group

Note 2018 2017

Finance lease receivables 133,574 121,493 Less: unearned finance lease income (19,105) (16,763)

Present value of minimum finance lease receivables 114,469 104,730

Less: allowance for impairment losses (i) (3,645) (3,426)

Net balance 110,824 101,304

375 23 LONG-TERM RECEIVABLES (CONTINUED)

Finance lease receivables, unearned finance lease income and minimum finance lease receivables analysed by remaining period are listed as follows:

Group

2018 2017

Unearned Minimum Unearned Minimum Finance finance finance Finance finance finance lease lease lease lease lease lease receivables income receivables receivables income receivables

Less than 1 year 41,646 (3,565) 38,081 36,287 (2,925) 33,362 1 year to 2 years 35,002 (3,724) 31,278 28,546 (3,032) 25,514 2 years to 3 years 18,734 (2,638) 16,096 19,964 (2,548) 17,416 3 years to 5 years 15,973 (3,102) 12,871 15,975 (3,024) 12,951 More than 5 years 18,018 (5,513) 12,505 15,023 (4,724) 10,299 Indefinite* 4,201 (563) 3,638 5,698 (510) 5,188

133,574 (19,105) 114,469 121,493 (16,763) 104,730

* The indefinite period amount represents the balances being impaired or overdue for more than one month.

(i) Changes in allowance for impairment losses of long-term receivables:

Allowance for impairment losses

As at 31 December 2017 (3,426) Changes in accounting policies (385)

As at 1 January 2018 (3,811)

Group

Lifetime ECL Lifetime ECL 12-month not credit- credit- ECL impaired impaired Total

Balance at 1 January 2018 (684) (1,815) (1,312) (3,811) Transfer: — to 12-month ECL — — — — — to lifetime ECL not credit-impaired 24 (24) — — — to lifetime ECL credit-impaired — 261 (261) — (Charge)/reverse (291) (617) 277 (631) Exchange difference and other movements 38 11 748 797

Balance at 31 December 2018 (913) (2,184) (548) (3,645)

376 23 LONG-TERM RECEIVABLES (CONTINUED)

(i) Changes in allowance for impairment losses of long-term receivables: (continued)

2017

At 1 January (3,441) Charge for the year (449) Transfer out 216 Write-offs 248

At 31 December (3,426)

24 PROPERTY AND EQUIPMENT

Group Bank

Note 2018 2017 2018 2017

Property and equipment (1) 48,763 48,338 22,364 21,559 Disposal of property and equipment 2 — 2 —

Total 48,765 48,338 22,366 21,559

377 24 PROPERTY AND EQUIPMENT (CONTINUED)

(1) Property and equipment

Group

Operating Leasehold Office Motor lease fixed Construction Buildings improvement equipment vehicles assets in progress Total

Original cost Balance at 1 January 2017 14,289 9,473 8,715 524 25,834 4,626 63,461

Increase 199 540 516 22 6,697 1,006 8,980 CIP transfers 750 — — — — (750) — Decrease — (4,277) (466) (24) (2,874) (2) (7,643)

Balance at 31 December 2017 15,238 5,736 8,765 522 29,657 4,880 64,798

Increase 1,154 326 528 19 3,540 692 6,259 CIP transfers 1,726 — — — — (1,726) — Decrease (58) (1,385) (402) (35) (1,843) — (3,723)

Balance at 31 December 2018 18,060 4,677 8,891 506 31,354 3,846 67,334

Accumulated depreciation Balance at 1 January 2017 (2,782) (6,556) (5,244) (358) (2,161) — (17,101)

Increase (444) (1,089) (1,251) (56) (1,320) — (4,160) Decrease — 4,260 408 23 316 — 5,007

Balance at 31 December 2017 (3,226) (3,385) (6,087) (391) (3,165) — (16,254)

Increase (543) (905) (1,065) (46) (1,540) — (4,099) Decrease — 1,366 379 32 211 — 1,988

Balance at 31 December 2018 (3,769) (2,924) (6,773) (405) (4,494) — (18,365)

Impairment losses Balance at 1 January 2017 — — — — (170) — (170)

Increase — — — — (36) — (36) Decrease — — — — — — —

Balance at 31 December 2017 — — — — (206) — (206)

Increase — — — — (8) — (8) Decrease — — — — 8 — 8

Balance at 31 December 2018 — — — — (206) — (206)

Net value Balance at 31 December 2017 12,012 2,351 2,678 131 26,286 4,880 48,338

Balance at 31 December 2018 14,291 1,753 2,118 101 26,654 3,846 48,763

378 24 PROPERTY AND EQUIPMENT (CONTINUED)

(1) Property and equipment (continued)

Bank

Leasehold Office Motor Construction Buildings improvement equipment vehicles in progress Total

Original cost Balance at 1 January 2017 13,834 9,279 8,526 489 4,544 36,672

Increase 192 522 470 21 1,137 2,342 CIP transfers 750 — — — (750) — Decrease (1) (4,233) (449) (18) — (4,701)

Balance at 31 December 2017 14,775 5,568 8,547 492 4,931 34,313

Increase 1,862 321 517 16 692 3,408 CIP transfers 1,726 — — — (1,726) — Decrease (58) (1,374) (400) (30) — (1,862)

Balance at 31 December 2018 18,305 4,515 8,664 478 3,897 35,859

Accumulated depreciation Balance at 1 January 2017 (2,716) (6,419) (5,093) (334) — (14,562)

Increase (456) (1,066) (1,249) (53) — (2,824) Decrease — 4,211 403 18 — 4,632

Balance at 31 December 2017 (3,172) (3,274) (5,939) (369) — (12,754)

Increase (531) (889) (1,045) (43) — (2,508) Decrease — 1,362 377 28 — 1,767

Balance at 31 December 2018 (3,703) (2,801) (6,607) (384) — (13,495)

Net value Balance at 31 December 2017 11,603 2,294 2,608 123 4,931 21,559

Balance at 31 December 2018 14,602 1,714 2,057 94 3,897 22,364

As at 31 December 2018 and 31 December 2017, the Group and the Bank did not have any property and equipment which were acquired by means of finance leasing or temporarily idle or held for sale.

The carrying value of buildings and leasehold improvements is analysed by the remaining terms of the leases as follows:

Group Bank

2018 2017 2018 2017

Held in mainland China on medium-term lease (10–50 years) 14,177 11,853 14,493 11,568 on short-term lease (less than 10 years) 1,867 2,510 1,823 2,329

Total 16,044 14,363 16,316 13,897

As at 31 December 2018, the process of obtaining certificates of ownership for the Group’s properties and buildings with an aggregate carrying value of RMB1,315 million (31 December 2017: RMB1,016 million) was still in progress. Management is of the view that the aforesaid matter would not affect the Group’s rights to these assets nor have any significant impact on the Group’s operations. 379 25 DEFERRED INCOME TAX ASSETS AND LIABILITIES

(1) Deferred income tax assets and liabilities without taking into consideration the offsetting of balances within the same tax jurisdiction are as follows:

Group

2018 2017

Deferred Deductible/ Deferred Deductible/ income (taxable) income (taxable) tax assets/ temporary tax assets/ temporary (liabilities) differences (liabilities) differences

Deferred income tax assets

Asset impairment allowance 31,079 124,316 24,686 98,744 Employee benefits payable 2,733 10,932 2,858 11,432 Fair value losses of — derivatives 4,509 18,036 4,515 18,060 — available-for-sale securities — — 1,635 6,543 — financial assets at fair value through other comprehensive income 130 520 — — — financial assets at fair value through profit or loss 1,112 4,448 107 427 Others 308 1,232 108 432

Subtotal 39,871 159,484 33,909 135,638

Deferred income tax liabilities

Fair value gains of — derivatives (8,256) (33,024) (4,647) (18,586) — available-for-sale securities — — (79) (316) — financial assets at fair value through other comprehensive income (609) (2,436) — — — financial assets at fair value through profit or loss (315) (1,260) (21) (84) Others (123) (492) (65) (260)

Subtotal (9,303) (37,212) (4,812) (19,246)

Deferred income tax assets, net 30,568 122,272 29,097 116,392

380 25 DEFERRED INCOME TAX ASSETS AND LIABILITIES (CONTINUED)

(1) Deferred income tax assets and liabilities without taking into consideration the offsetting of balances within the same tax jurisdiction are as follows: (continued)

Bank

2018 2017

Deferred Deductible/ Deferred Deductible/ income (taxable) income (taxable) tax assets/ temporary tax assets/ temporary (liabilities) differences (liabilities) differences

Deferred income tax assets

Asset impairment allowance 30,150 120,600 23,819 95,276 Employee benefits payable 2,701 10,804 2,822 11,288 Fair value losses of — derivatives 4,509 18,036 4,515 18,060 — available-for-sale securities — — 1,635 6,543 — financial assets at fair value through other comprehensive income 130 520 — — — financial assets at fair value through profit or loss 1,112 4,448 107 427

Subtotal 38,602 154,408 32,898 131,594

Deferred income tax liabilities

Fair value gains of — derivatives (8,256) (33,024) (4,647) (18,586) — available-for-sale securities — — (25) (98) — financial assets at fair value through other comprehensive income (548) (2,192) — — — financial assets at fair value through profit or loss (298) (1,192) (21) (84)

Subtotal (9,102) (36,408) (4,693) (18,768)

Deferred income tax assets, net 29,500 118,000 28,205 112,826

381 25 DEFERRED INCOME TAX ASSETS AND LIABILITIES (CONTINUED)

(2) Movements in deferred income tax assets and liabilities without taking into consideration the offsetting of balances within the same tax jurisdiction are as follows:

Group

Gross Gross Asset deferred Fair value deferred impairment Fair value income tax gains and income tax allowance losses Others assets others liabilities

At 31 December 2017 24,686 6,257 2,966 33,909 (4,812) (4,812) Changes in accounting policies 3,158 370 — 3,528 (126) (126)

At 1 January 2018 27,844 6,627 2,966 37,437 (4,938) (4,938) Recognised in profit or loss 3,235 111 75 3,421 (3,826) (3,826) Recognised in other comprehensive income — (987) — (987) (539) (539)

At 31 December 2018 31,079 5,751 3,041 39,871 (9,303) (9,303)

At 1 January 2017 19,760 3,089 2,555 25,404 (2,038) (2,038) Recognised in profit or loss 4,926 2,470 411 7,807 (2,793) (2,793) Recognised in other comprehensive income — 698 — 698 19 19

At 31 December 2017 24,686 6,257 2,966 33,909 (4,812) (4,812)

Bank

Gross Gross Asset deferred Fair value deferred impairment Fair value income tax gains and income tax allowance losses Others assets others liabilities

At 31 December 2017 23,819 6,257 2,822 32,898 (4,693) (4,693) Changes in accounting policies 3,063 366 — 3,429 (126) (126)

At 1 January 2018 26,882 6,623 2,822 36,327 (4,819) (4,819) Recognised in profit or loss 3,268 115 (121) 3,262 (3,751) (3,751) Recognised in other comprehensive income — (987) — (987) (532) (532)

At 31 December 2018 30,150 5,751 2,701 38,602 (9,102) (9,102)

At 1 January 2017 18,905 3,089 2,421 24,415 (2,013) (2,013) Recognised in profit or loss 4,914 2,470 401 7,785 (2,728) (2,728) Recognised in other comprehensive income — 698 — 698 48 48

At 31 December 2017 23,819 6,257 2,822 32,898 (4,693) (4,693)

382 25 DEFERRED INCOME TAX ASSETS AND LIABILITIES (CONTINUED)

(3) Offsetting of balances within the same tax jurisdiction of deferred income tax assets and liabilities are as follows:

Group Bank 2018 2017 2018 2017

Deferred income tax assets — — — — Deferred income tax liabilities (9,180) (4,747) (9,102) (4,693)

(4) Deferred income tax assets and liabilities taking into consideration the offsetting of balances within the same tax jurisdiction are as follows:

Group

2018 2017 Deductible/ Deductible/ Net deferred (taxable) Net deferred (taxable) income tax temporary income tax temporary assets/ differences assets/ differences (liabilities) after offsetting (liabilities) after offsetting

Deferred income tax assets 30,691 122,764 29,162 116,652 Deferred income tax liabilities (123) (492) (65) (260)

Bank

2018 2017

Deductible/ Deductible/ Net deferred (taxable) Net deferred (taxable) income tax temporary income tax temporary assets/ differences assets/ differences (liabilities) after offsetting (liabilities) after offsetting

Deferred income tax assets 29,500 118,000 28,205 112,826 Deferred income tax liabilities — — — —

383 26 INVESTMENT IN SUBSIDIARIES

2018 2017

Minsheng Financial Leasing 2,600 2,600 CMBC International 2,494 1,614 Minsheng Royal Fund 190 190 Pengzhou Rural Bank 20 20 Cixi Rural Bank 35 35 Songjiang Rural Bank 70 70 Qijiang Rural Bank 30 30 Tongnan Rural Bank 25 25 Meihekou Rural Bank 26 26 Ziyang Rural Bank 172 41 Jiangxia Rural Bank 41 41 Changyuan Rural Bank 26 26 Yidu Rural Bank 26 26 Jiading Rural Bank 102 102 Zhongxiang Rural Bank 36 36 Penglai Rural Bank 51 51 Anxi Rural Bank 51 51 Funing Rural Bank 52 52 Taicang Rural Bank 76 76 Ningjin Rural Bank 20 20 Zhangpu Rural Bank 25 25 Puer Rural Bank 15 15 Jinghong Rural Bank 15 15 Zhidan Rural Bank 7 7 Ningguo Rural Bank 20 20 Yuyang Rural Bank 25 25 Guichi Rural Bank 26 26 Tiantai Rural Bank 31 31 Tianchang Rural Bank 20 20 Tengchong Rural Bank 20 20 Xiang’an Rural Bank 36 36 Linzhi Rural Bank 13 13

Total 6,396 5,385

384 26 INVESTMENT IN SUBSIDIARIES (CONTINUED)

% of Place of ownership % of voting incorporation Principal Registered Nature of held by rights held Name and operation activities capital legal entity the Bank by the Bank

Minsheng Financial Leasing Tianjin China Leasing RMB5,095 million Limited company 51.03 51.03

CMBC International Hongkong China Investment banking HKD3,000 million Limited company 100.00 100.00

Minsheng Royal Fund Guangdong China Fund management RMB300 million Limited company 63.33 63.33

Pengzhou Rural Bank (i) Sichuan China Commercial bank RMB55 million Limited company 36.36 36.36

Cixi Rural Bank (i) Zhejiang China Commercial bank RMB100 million Limited company 35 35

Songjiang Rural Bank (i) Shanghai China Commercial bank RMB150 million Limited company 35 35

Qijiang Rural Bank (ii) Chongqing China Commercial bank RMB61.57 million Limited company 48.73 51.27

Tongnan Rural Bank (i) Chongqing China Commercial bank RMB50 million Limited company 50 50

Meihekou Rural Bank Jilin China Commercial bank RMB50 million Limited company 51 51

Ziyang Rural Bank Sichuan China Commercial bank RMB211 million Limited company 81.41 81.41

Jiangxia Rural Bank Hubei China Commercial bank RMB86 million Limited company 51 51

Changyuan Rural Bank Henan China Commercial bank RMB50 million Limited company 51 51

Yidu Rural Bank Hubei China Commercial bank RMB52.4 million Limited company 51 51

Jiading Rural Bank Shanghai China Commercial bank RMB200 million Limited company 51 51

Zhongxiang Rural Bank Hubei China Commercial bank RMB70 million Limited company 51 51

Penglai Rural Bank Shandong China Commercial bank RMB100 million Limited company 51 51

Anxi Rural Bank Fujian China Commercial bank RMB100 million Limited company 51 51

Funing Rural Bank Jiangsu China Commercial bank RMB85 million Limited company 51 51

Taicang Rural Bank Jiangsu China Commercial bank RMB135 million Limited company 51 51

385 26 INVESTMENT IN SUBSIDIARIES (CONTINUED)

% of Place of ownership % of voting incorporation Principal Registered Nature of held by rights held Name and operation activities capital legal entity the Bank by the Bank

Ningjin Rural Bank Hebei China Commercial bank RMB40 million Limited company 51 51

Zhangpu Rural Bank Fujian China Commercial bank RMB50 million Limited company 51 51

Puer Rural Bank Yunnan China Commercial bank RMB30 million Limited company 51 51

Jinghong Rural Bank Yunnan China Commercial bank RMB30 million Limited company 51 51

Zhidan Rural Bank Shaanxi China Commercial bank RMB15 million Limited company 51 51

Ningguo Rural Bank Anhui China Commercial bank RMB40 million Limited company 51 51

Yuyang Rural Bank Shaanxi China Commercial bank RMB50 million Limited company 51 51

Guichi Rural Bank Anhui China Commercial bank RMB50 million Limited company 51 51

Tiantai Rural Bank Zhejiang China Commercial bank RMB60 million Limited company 51 51

Tianchang Rural Bank Anhui China Commercial bank RMB40 million Limited company 51 51

Tengchong Rural Bank Yunnan China Commercial bank RMB40 million Limited company 51 51

Xiang’an Rural Bank Fujian China Commercial bank RMB70 million Limited company 51 51

Linzhi Rural Bank Tibet China Commercial bank RMB25 million Limited company 51 51

All interests in subsidiaries are directly held by the Bank.

(i) Although the Bank holds half or less than half of the voting rights in some rural banks, it has the majority of the seats in their boards of directors, which enables it to govern their operating policies. These companies are treated as the Bank’s subsidiaries and have been consolidated in these financial statements.

(ii) According to the concerted action agreement signed by the Bank and other shareholders, the Bank acquires control over Qijiang Rural Bank and therefore classifies the investment in Qijiang Rural Bank as investment in a subsidiary.

386 27 OTHER ASSETS

Group

2018 2017 Allowance Allowance for for Gross impairment Carrying Gross impairment Carrying Note balance losses amount balance losses amount

Repossessed assets (1) 10,631 (80) 10,551 11,099 (85) 11,014 Prepayments for leased assets (2) 7,924 (97) 7,827 10,646 (173) 10,473 Commission receivable 7,678 — 7,678 4,797 (9) 4,788 Items in the process of clearance and settlement 6,156 (47) 6,109 13,436 (65) 13,371 Investment properties 4,604 — 4,604 7,008 — 7,008 Interest receivable (3) 3,597 — 3,597 39,664 — 39,664 Land use right 3,564 — 3,564 3,958 — 3,958 Claims and legal fees recoverable 3,124 (1,286) 1,838 2,624 (863) 1,761 Prepayment 2,037 — 2,037 795 — 795 Intangible assets (4) 1,192 — 1,192 957 — 957 Margin accounts receivable 934 (2) 932 908 — 908 Goodwill (5) 201 — 201 198 (6) 192 Long-term deferred expenses 106 — 106 137 — 137 Others 8,550 — 8,550 8,768 — 8,768

Total 60,298 (1,512) 58,786 104,995 (1,201) 103,794

Bank

2018 2017 Allowance Allowance for for Gross impairment Carrying Gross impairment Carrying Note balance losses amount balance losses amount

Repossessed assets (1) 9,976 (53) 9,923 10,431 (61) 10,370 Commission receivable 7,678 — 7,678 4,788 — 4,788 Interest receivable (3) 3,597 — 3,597 39,096 — 39,096 Items in the process of clearance and settlement 3,455 — 3,455 12,358 (46) 12,312 Claims and legal fees recoverable 3,118 (1,286) 1,832 2,618 (862) 1,756 Land use right 2,723 — 2,723 2,807 — 2,807 Prepayment 2,024 — 2,024 762 — 762 Intangible assets (4) 1,140 — 1,140 897 — 897 Long-term deferred expenses 76 — 76 95 — 95 Others 4,296 — 4,296 4,479 — 4,479

Total 38,083 (1,339) 36,744 78,331 (969) 77,362

(1) Repossessed assets

Repossessed assets include buildings, land use right and motor vehicles. The Group disposed repossessed assets with a total cost of RMB1,377 million during the year of 2018 (2017: RMB1,176 million).

387 27 OTHER ASSETS (CONTINUED)

(2) Prepayments for leased assets

They represented the prepayments made by the Group for acquiring leased assets under finance leases and operating leases.

(3) Interest receivable

Group Bank

2018 2017 2018 2017

Loans and advances to customers 2,073 21,391 2,073 21,344 Debt and other securities 1,492 16,901 1,492 16,852 Others 32 1,372 32 900

Total 3,597 39,664 3,597 39,096

(4) Intangible assets

Group

2018 2017

Cost Balance at 1 January 3,594 3,215

Increase 697 389 Decrease (1) (10)

Balance at 31 December 4,290 3,594

Accumulated amortisation Balance at 1 January (2,637) (2,267)

Increase (462) (377) Decrease 1 7

Balance at 31 December (3,098) (2,637)

Net value Balance at 1 January 957 948

Balance at 31 December 1,192 957

388 27 OTHER ASSETS (CONTINUED)

(4) Intangible assets (continued)

Bank

2018 2017

Cost Balance at 1 January 3,478 3,136

Increase 691 352 Decrease (1) (10)

Balance at 31 December 4,168 3,478

Accumulated amortisation Balance at 1 January (2,581) (2,224)

Increase (448) (363) Decrease 1 6

Balance at 31 December (3,028) (2,581)

Net value Balance at 1 January 897 912

Balance at 31 December 1,140 897

(5) Goodwill

2018 2017

At 1 January 198 6 Acquisition of subsidiaries — 192 Disposal of subsidiaries (6) — Exchange difference 9 —

Gross amount 201 198

Impairment — (6)

Net amount 201 192

Goodwill arising from business combinations has been allocated to the Group’s Cash Generating Unit, which is not larger than the reportable segment of the Group, for impairment testing.

The allowance appropriated for the impairment of goodwill was nil as at 31 December 2018 (31 December 2017: RMB6 million).

389 28 DEPOSITS FROM CUSTOMERS

Group Bank

2018 2017 2018 2017

Demand deposits — Corporate deposits 1,104,706 1,187,367 1,092,485 1,172,480 — Personal deposits 197,933 182,652 196,350 181,070

Time deposits (including call and notice deposits) — Corporate deposits 1,473,907 1,267,880 1,469,156 1,262,267 — Personal deposits 377,356 309,356 368,926 301,168

Certificates of deposit 10,444 12,069 10,444 12,069 Outward remittance and remittance payables 2,946 6,987 2,929 6,967

Subtotal 3,167,292 2,966,311 3,140,290 2,936,021

Interest accrued 27,149 — 26,822 —

Total 3,194,441 2,966,311 3,167,112 2,936,021

The pledged deposits included in deposits from customers are analysed as follows:

Group Bank

2018 2017 2018 2017

Pledged deposits for bank acceptances 130,012 122,253 129,867 122,148 Pledged deposits for letters of credit and guarantees 55,284 23,596 55,259 23,582 Other pledged deposits 32,469 82,008 32,343 81,920

Subtotal 217,765 227,857 217,469 227,650

29 DEPOSITS AND PLACEMENTS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

Group Bank

2018 2017 2018 2017

Mainland China — Banks 254,963 322,893 259,118 328,602 — Other financial institutions 726,295 887,264 727,507 889,694 Overseas — Banks 81,117 88,502 81,117 88,502 — Other financial institutions 22,863 17,334 23,657 17,834

Subtotal 1,085,238 1,315,993 1,091,399 1,324,632

Interest accrued 6,622 — 6,645 —

Total 1,091,860 1,315,993 1,098,044 1,324,632

390 30 FINANCIAL ASSETS SOLD UNDER REPURCHASE AGREEMENTS

Group Bank

2018 2017 2018 2017

Investment securities 55,956 60,539 54,930 60,539 Discounted bills 33,408 46,930 33,399 46,851 Including: bills rediscounted 26,294 16,273 26,284 16,194 Long-term receivables 16 53 — —

Subtotal 89,380 107,522 88,329 107,390

Interest accrued 307 — 299 —

Total 89,687 107,522 88,628 107,390

31 BORROWINGS FROM BANKS AND OTHER FINANCIAL INSTITUTIONS

Group

2018 2017

Credit borrowings 102,955 123,419 Secured borrowings — by tangible assets other than monetary assets 21,310 23,580

Subtotal 124,265 146,999

Interest accrued 778 —

Total 125,043 146,999

As at 31 December 2018, the secured borrowings of RMB21,310 million (31 December 2017: RMB23,580 million) were secured by equipment of RMB15,261 million (31 December 2017: RMB10,701 million) and the assets under financial lease of RMB15,782 million (31 December 2017: RMB14,364 million). As at 31 December 2018, there was no unused borrowing limit under secured borrowings (31 December 2017: None).

391 32 PROVISIONS

Group Bank

2018 2017 2018 2017

Credit loss of off-balance-sheet assets 1,371 809 1,370 808

As at 31 December 2018, movements of credit loss of off-balance-sheet assets are as follows:

Group

Allowance for impairment losses

As at 31 December 2017 (809) Changes in accounting policies (1,424)

As at 1 January 2018 (2,233)

Group

Lifetime ECL not credit- Lifetime ECL 12-month ECL impaired credit-impaired Total

Balance at 1 January 2018 (1,791) (442) — (2,233) Transfer: — to 12-month ECL (4) 4 — — — to lifetime ECL not credit-impaired 3 (3) — — — to lifetime ECL credit-impaired 1 1 (2) — Reverse/(charge) 463 407 (1) 869 Exchange difference and other movements (7) — — (7)

Balance at 31 December 2018 (1,335) (33) (3) (1,371)

Bank

Allowance for impairment losses

As at 31 December 2017 (808) Changes in accounting policies (1,425)

As at 1 January 2018 (2,233)

392 32 PROVISIONS (CONTINUED)

Bank

Lifetime ECL not Lifetime ECL 12-month ECL credit-impaired credit-impaired Total

Balance at 1 January 2018 (1,791) (442) — (2,233) Transfer: — to 12-month ECL (4) 4 — — — to lifetime ECL not credit-impaired 3 (3) — — — to lifetime ECL credit-impaired 1 1 (2) — Reverse/(charge) 464 407 (1) 870 Exchange difference and other movements (7) — — (7)

Balance at 31 December 2018 (1,334) (33) (3) (1,370)

33 DEBT SECURITIES ISSUED

Group Bank

Note 2018 2017 2018 2017

Certificates of interbank deposit 435,962 335,131 435,962 335,131 Financial bonds (1) 114,951 50,951 109,963 49,953 Tier-two capital bonds (2) 89,911 89,899 89,911 89,899 Medium-term notes (3) 20,544 16,958 20,544 16,958 Hybrid capital bonds (4) 4,994 4,993 4,994 4,993 Subordinated bonds (5) 3,995 3,995 3,995 3,995

Subtotal 670,357 501,927 665,369 500,929

Interest accrued 4,166 — 4,027 —

Total 674,523 501,927 669,396 500,929

There were no overdue principal and interest or other defaults with respect to these bonds. None of these bonds are secured.

393 33 DEBT SECURITIES ISSUED (CONTINUED)

(1) Financial bonds

Group Bank

Note 2018 2017 2018 2017

RMB40.0 billion — 5-year fixed rate financial bonds 2018 (i) 39,990 — 39,990 — RMB30.0 billion — 3-year fixed rate financial bonds 2017 (ii) 29,985 29,971 29,985 29,971 RMB20.0 billion — 5-year fixed rate financial bonds 2018 (iii) 19,995 — 19,995 — RMB20.0 billion — 3-year fixed rate financial bonds 2016 (iv) 19,993 19,982 19,993 19,982 RMB4.0 billion — 3-year fixed rate financial bonds 2018 (v) 3,989 — — — RMB1.0 billion — 3-year fixed rate financial bonds 2017 (vi) 999 998 — —

Total 114,951 50,951 109,963 49,953

(i) RMB40.0 billion worth of fixed-rate financial bonds were issued in 2018, with a term of five years, and a fixed coupon rate of 3.83% per annum.

(ii) RMB30.0 billion worth of fixed-rate financial bonds were issued in 2017, with a term of three years, and a fixed coupon rate of 4.00% per annum.

(iii) RMB20.0 billion worth of fixed-rate financial bonds were issued in 2018, with a term of five years, and a fixed coupon rate of 3.76% per annum.

(iv) RMB20.0 billion worth of fixed-rate financial bonds were issued in 2016, with a term of three years, and a fixed coupon rate of 2.95% per annum.

(v) RMB4.0 billion worth of fixed-rate financial bonds were issued in 2018, with a term of three years, and a fixed coupon rate of 4.90% per annum.

(vi) RMB1.0 billion worth of fixed-rate financial bonds were issued in 2017, with a term of three years, and a fixed coupon rate of 4.50% per annum.

394 33 DEBT SECURITIES ISSUED (CONTINUED)

(2) Tier-two capital bonds

Group and Bank

Note 2018 2017

RMB20.0 billion — 10-year fixed rate tier-two capital bonds 2014 (i) 19,983 19,982 RMB20.0 billion — 10-year fixed rate tier-two capital bonds 2015 (ii) 19,983 19,981 RMB20.0 billion — 10-year fixed rate tier-two capital bonds 2016 (iii) 19,979 19,974 RMB15.0 billion — 10-year fixed rate tier-two capital bonds 2017 1st tranche (iv) 14,983 14,981 RMB15.0 billion — 10-year fixed rate tier-two capital bonds 2017 2nd tranche (v) 14,983 14,981

Total 89,911 89,899

(i) Tier-two capital bonds with a nominal value of RMB20.0 billion, a term of 10 years, and a fixed coupon rate of 6.60% per annum, were issued in 2014. The Bank has an option to redeem all or part of the subordinated bonds at par value during the period from the last day of the fifth year to the maturity date.

(ii) Tier-two capital bonds with a nominal value of RMB20.0 billion, a term of 10 years, and a fixed coupon rate of 5.40% per annum, were issued in 2015. The Bank has an option to redeem all or part of the subordinated bonds at par value during the period from the last day of the fifth year to the maturity date.

(iii) Tier-two capital bonds with a nominal value of RMB20.0 billion, a term of 10 years, and a fixed coupon rate of 3.50% per annum, were issued in 2016. The Bank has an option to redeem all or part of the subordinated bonds at par value during the period from the last day of the fifth year to the maturity date.

(iv) Tier-two capital bonds with a nominal value of RMB15.0 billion, a term of 10 years, and a fixed coupon rate of 4.70% per annum, were issued in 2017 as the 1st tranche. The Bank has an option to redeem all or part of the subordinated bonds at par value during the period from the last day of the fifth year to the maturity date.

(v) Tier-two capital bonds with a nominal value of RMB15.0 billion, a term of 10 years, and a fixed coupon rate of 4.70% per annum, were issued in 2017 as the 2nd tranche. The Bank has an option to redeem all or part of the subordinated bonds at par value during the period from the last day of the fifth year to the maturity date.

395 33 DEBT SECURITIES ISSUED (CONTINUED)

(3) Medium-term notes

Group and Bank

Note 2018 2017

USD 0.6 billion — 5-year medium-term notes 2018 (i) 4,110 — USD 0.5 billion — 3-year medium-term notes 2017 (ii) 3,423 3,259 USD 0.45 billion — 3-year medium-term notes 2017 (iii) 3,085 2,935 USD 0.45 billion — 3-year medium-term notes 2017 (iv) 3,081 2,935 USD 0.4 billion — 3-year medium-term notes 2018 (v) 2,737 — USD 0.35 billion — 5-year medium-term notes 2017 (vi) 2,398 2,282 USD 0.25 billion — 3-year medium-term notes 2017 (vii) 1,710 1,631 USD 0.6 billion — 3-year medium-term notes 2015 (viii) — 3,916

Total 20,544 16,958

(i) Medium-term notes with a nominal value of USD 0.6 billion of medium-term notes were issued in 2018, with a term of 5 years. The coupon rate is 3.38%.

(ii) Medium-term notes with a nominal value of USD 0.5 billion of medium-term notes were issued in 2017, with a term of 3 years. The coupon rate is 2.50%.

(iii) Medium-term notes with a nominal value of USD 0.45 billion of medium-term notes were issued in 2017, with a term of 3 years. The coupon rate is 2.44%.

(iv) Medium-term notes with a nominal value of USD 0.45 billion of medium-term notes were issued in 2017, with a term of 3 years. The coupon rate is 2.34%.

(v) Medium-term notes with a nominal value of USD 0.4 billion of medium-term notes were issued in 2018, with a term of 3 years. The coupon rate is 3.50%.

(vi) Medium-term notes with a nominal value of USD 0.35 billion of medium-term notes were issued in 2017, with a term of 5 years. The coupon rate is 2.54%.

(vii) Medium-term notes with a nominal value of USD 0.25 billion of medium-term notes were issued in 2017, with a term of 3 years. The coupon rate is 2.88%.

(viii) Medium-term notes with a nominal value of USD 0.6 billion of medium-term notes were issued in 2015, with a term of 3 years. The coupon rate is 2.25%. The Bank has redeemed all the medium-term notes as at 21 May 2018.

396 33 DEBT SECURITIES ISSUED (CONTINUED)

(4) Hybrid capital bonds

Group and Bank

Note 2018 2017

RMB3.325 billion — 15-year hybrid capital fixed rate bonds 2009 (i) 3,321 3,320 RMB1.675 billion — 15-year hybrid capital floating rate bonds 2009 (ii) 1,673 1,673

Total 4,994 4,993

(i) Hybrid capital bonds with a nominal value of RMB3.325 billion, a term of 15 years and a fixed coupon rate is 5.70% per annum for the first 10 years, were issued in 2009. And if the Bank does not exercise the early redemption right from the 11th year onward, the coupon rate will increase to 8.70% per annum.

(ii) Hybrid capital bonds with a nominal value of RMB1.675 billion, a term of 15 years and of floating-rate, were issued in 2009. The floating rate is based on the one-year time deposit rate published by the PBOC plus a spread of 3.00% per annum for the first 10 years. If the Bank does not exercise the early redemption right from the 11th year onward, the spread will increase to 6.00% per annum.

The holders of the hybrid capital bonds are subordinated to holders of subordinated bonds and tier-two capital bonds, but have priority over shareholders. All holders of hybrid capital bonds enjoy the same priority of claim. According to the issuance terms, the Bank has an option to defer interest payment if the core capital adequacy ratio calculated based on its latest audited financial reports is below 4%. If the sum of surplus reserve plus retained earnings shown on the latest audited statement of financial position is negative and no cash dividend has been paid to ordinary equity shareholders in the last 12 months, the Bank must defer interest payment.

(5) Subordinated bonds

Group and Bank

Note 2018 2017

RMB4.0 billion — 15-year subordinated fixed rate bonds 2011 (i) 3,995 3,995

(i) Subordinated bonds with a nominal value of RMB4.0 billion, a term of 15 years and a fixed coupon rate of 5.70% per annum, were issued in 2011. The Bank has an option to redeem all or part of the subordinated bonds at par value during the period from the last day of the tenth year to the maturity date.

According to the issuance terms, these bonds are subordinated to all other claims against the Bank’s assets, except those of the hybrid capital bond holders and shareholders.

397 34 OTHER LIABILITIES

Group Bank

Note 2018 2017 2018 2017

Items in the process of clearance and settlement 11,498 22,235 11,342 22,221 Employee benefits payable (1) 11,130 11,638 10,804 11,288 Receipt in advance 10,479 11,289 — — Other tax payable (2) 4,390 3,588 3,909 3,404 Intermediate collection and payment 3,897 2,701 3,897 2,438 Payable for long-term assets 750 583 2,156 385 Accrued expenses 702 472 809 421 Deferred fee and commission income 387 381 387 381 Guarantee deposits for finance lease 327 318 — — Interest payables (3) — 42,276 — 40,925 Others 11,175 8,738 3,974 3,131

Total 54,735 104,219 37,278 84,594

(1) Employee benefits payable

Group

At At 1 January 31 December 2018 Increase Decrease 2018

Short-term employee benefits Salaries, bonuses and allowances 11,297 18,241 (18,807) 10,731 Staff welfare fees — 2,179 (2,179) — Social insurance and supplementary insurance 57 1,336 (1,307) 86 Housing fund 126 1,129 (1,110) 145 Labour union fee, staff and workers’ education fee 24 584 (587) 21

Subtotal 11,504 23,469 (23,990) 10,983

Post-employment benefits-defined contribution plans Basic pension insurance plans 92 1,424 (1,417) 99 Unemployment insurance 17 49 (47) 19 Annuity scheme 25 940 (936) 29

Subtotal 134 2,413 (2,400) 147

Total 11,638 25,882 (26,390) 11,130

398 34 OTHER LIABILITIES (CONTINUED)

(1) Employee benefits payable (continued)

Group (continued)

At At 1 January 31 December 2017 Increase Decrease 2017

Short-term employee benefits Salaries, bonuses and allowances 9,784 17,771 (16,258) 11,297 Staff welfare fees — 2,243 (2,243) — Social insurance and supplementary insurance 47 1,317 (1,307) 57 Housing fund 117 1,077 (1,068) 126 Labour union fee, staff and workers’ education fee 38 544 (558) 24

Subtotal 9,986 22,952 (21,434) 11,504

Post-employment benefits-defined contribution plans Basic pension insurance plans 89 1,199 (1,196) 92 Unemployment insurance 12 48 (43) 17 Annuity scheme 20 920 (915) 25

Subtotal 121 2,167 (2,154) 134

Total 10,107 25,119 (23,588) 11,638

399 34 OTHER LIABILITIES (CONTINUED)

(1) Employee benefits payable (continued)

Bank

At At 1 January 31 December 2018 Increase Decrease 2018

Short-term employee benefits Salaries, bonuses and allowances 10,975 17,403 (17,937) 10,441 Staff welfare fees — 2,120 (2,120) — Social insurance and supplementary insurance 55 1,300 (1,277) 78 Housing fund 126 1,088 (1,069) 145 Labour union fee, staff and workers’ education fee 3 566 (566) 3

Subtotal 11,159 22,477 (22,969) 10,667

Post-employment benefits-defined contribution plans Basic pension insurance plans 92 1,373 (1,368) 97 Unemployment insurance 17 46 (44) 19 Annuity scheme 20 913 (912) 21

Subtotal 129 2,332 (2,324) 137

Total 11,288 24,809 (25,293) 10,804

At At 1 January 31 December 2017 Increase Decrease 2017

Short-term employee benefits Salaries, bonuses and allowances 9,383 16,917 (15,325) 10,975 Staff welfare fees — 2,189 (2,189) — Social insurance and supplementary insurance 47 1,290 (1,282) 55 Housing fund 117 1,039 (1,030) 126 Labour union fee, staff and workers’ education fee 20 516 (533) 3

Subtotal 9,567 21,951 (20,359) 11,159

Post-employment benefits-defined contribution plans Basic pension insurance plans 88 1,152 (1,148) 92 Unemployment insurance 12 45 (40) 17 Annuity scheme 19 891 (890) 20

Subtotal 119 2,088 (2,078) 129

Total 9,686 24,039 (22,437) 11,288

400 34 OTHER LIABILITIES (CONTINUED)

(2) Other tax payable

Group Bank

2018 2017 2018 2017

Value added tax 3,029 2,467 3,017 2,453 Others 1,361 1,121 892 951

Total 4,390 3,588 3,909 3,404

(3) Interest payable

2017

Group Bank

Deposits from customers 24,905 24,613 Deposits from banks and other financial institutions 6,087 6,106 Debt securities issued 3,789 3,771 Borrowings from banks and other financial institutions 1,058 — Others 6,437 6,435

Total 42,276 40,925

35 SHARE CAPITAL AND CAPITAL RESERVE

Group and Bank

2018 2017

Ordinary shares listed in Mainland China (A share) 35,462 29,551 Ordinary shares listed in Hong Kong (H share) 8,320 6,934

Total shares 43,782 36,485

All A shares and H shares are with no selling restrictions and rank pari passu with the same rights and benefits.

The shareholders approved the profit distribution and conversion of capital reserve to share capital plan for the second half of 2017 at the 2017 Annual General Meeting of Shareholders on 21 June 2018. The number of total shares issued before the implementation of the plan was 36,485 million, the Bank converted capital reserve to share capital on the basis of 2 shares for every 10 shares offered to all shareholders, and the total number of shares increased was 7,297 million. After the conversion, the total number of issued shares was 43,782 million.

The Group’s capital reserve was RMB57,470 million as at 31 December 2018 (31 December 2017: RMB64,753 million), which mainly comprised capital premium.

401 36 PREFERENCE SHARES

(1) Preference shares outstanding at the end of the year

Financial Accounting Dividend In original Conversion instrument outstanding Issue date classification rate Issue price Amount currency In RMB Maturity condition Conversion million shares million million

Overseas 20USD/ Preference Shares 14 Dec 2016 Equity 4.95% Share 72 1,439 9,933 None Mandatory No

Total 9,933

Less: Issue fees (41)

Book value 9,892

(2) Main Clauses

a Dividend

Fixed rate for a certain period after issuance. Dividend reset every 5 years thereafter to the sum of the benchmark rate and the Fixed Spread. The Fixed Spread will be equal to the spread between the dividend rate at the time of issuance and the benchmark rate. The Fixed Spread will remain unchanged throughout the term of the Preference Shares. Dividends will be paid annually.

b Conditions to distribution of dividends

The Group could pay dividends while the Group still has distributable after-tax profit after making up previous years’ losses, contributing to the statutory reserve and making general provisions, and the Group’s capital adequacy ratio meets regulatory requirements. Preference shareholders of the Group are senior to the ordinary shareholders on the right to dividends. The Group may elect to cancel any dividend, but such cancellation will require a shareholder’s resolution to be passed.

c Dividend stopper

If the Group cancels all or part of the dividends to the Preference Shareholders, the Group shall not make any dividend distribution to ordinary shareholders before the Group pays the dividends for the current dividend period to the Preference Shareholders in full.

d Order of distribution and liquidation method

The USD Preference Shareholders rank equally for payment. The Preference Shareholders will be subordinated to the depositors, ordinary creditors, holders of subordinated debt, holders of convertible bonds, holders of Tier 2 capital bonds and holders of other Tier 2 capital instruments of the Group, but will be senior to the ordinary shareholders.

402 36 PREFERENCE SHARES (CONTINUED)

(2) Main Clauses (continued)

e Mandatory conversion trigger events

Upon the occurrence of an Additional Tier 1 Capital Trigger Event (Core Tier 1 Capital Adequacy Ratio of the Group falling to 5.125% or below), the Group shall have the right to convert all or part of the Preference Shares into H shares, in order to restore the Core Tier 1 Capital Adequacy Ratio of the Group to above 5.125%; If Preference Shares were converted to H shares, it could not be converted to Preference Shares again.

Upon the occurrence of a Non-Viability Trigger Event (Earlier of the two situations: (1) CBIRC has determined that the Group would become non-viable if there is no conversion or write-down of capital; (2) the relevant authorities have determined that a public sector injection of capital or equivalent support is necessary, without which the Group would become non-viable), the Group shall have the right to convert all Preference Shares into H shares. If Preference Shares were converted to H shares, it could not be converted to Preference Shares again.

f Redemption

Under the premise of obtaining the approval of the CBIRC and condition of redemption, the Group has right to redeem all or some of oversee preferred stocks in first call date and subsequent any dividend payment date. The first call date after issuance and subsequent any dividend payment date (redemption price is equal to issue price plus accrued dividend in current period).

The First Redemption Date of USD Preference Shares is five years after issuance.

g Dividend setting mechanism

Non-cumulative dividend is a dividend on preference shares which does not cumulate upon omission of payment so as to require payment of a passed or omitted dividend of one year out of earnings of a following year. After receiving dividend at agreed dividend rate, preference shareholders of the Group will not participate the distribution of residual profits with ordinary shareholders.

The Group shall distribute dividends for the Preference Shares in cash, based on the total amount of the issued and outstanding Preference Shares on the corresponding times (i.e. the product of the issue price of preference shares and the number of the issued and outstanding preference shares).

37 SURPLUS RESERVE, GENERAL RESERVE AND RETAINED EARNINGS

(1) Surplus reserve

Under PRC laws, Articles of the Bank and the resolution of the Board of Directors, the Bank is required to appropriate 10% of its net profit, when the statutory surplus reserve reaches 50% of its registered capital, the Bank is still required to appropriate 10% of its net profit. Subject to the approval of the equity shareholders, the statutory surplus reserve can be used for replenishing the accumulated losses or increasing the Bank’s share capital. The statutory surplus reserve amount used to increase the share capital is limited to a level where the balance of the statutory surplus reserve after such capitalisation is not less than 25% of the share capital.

Pursuant to the resolution of the Meeting of Board of Directors on 29 March 2019, the Board proposed the Bank to appropriate RMB4,997 million to statutory reserve for the second half of 2018, which is subject to shareholders’ approval.

The Bank appropriated the statutory surplus reserve of RMB4,862 million for the year 2017.

The Bank did not make any appropriations to discretionary surplus reserve in 2018 and 2017.

403 37 SURPLUS RESERVE, GENERAL RESERVE AND RETAINED EARNINGS (CONTINUED)

(2) General reserve

Pursuant to the Measures for Managing the Appropriation of Provisions of Financial Enterprises (Cai Jin [2012] No. 20) issued by the MOF, the Bank is required to provide for impairment losses of its assets and set aside a general reserve through the appropriation of net profits to cover potential losses against its assets. The general reserve is part of the equity shareholders’ interests and should not be less than 1.5% of the year-end balance of risk-bearing assets.

The Bank’s subsidiaries appropriate their profits to the general reserve according to the applicable local regulations.

The Bank did not appropriate profits recorded to the general reserve in 2018 (For the year ended 31 December 2017: RMB 1,147 million).

(3) Retained earnings

As at 31 December 2018, retained earnings of the Group included the statutory surplus reserve of RMB561 million appropriated by the subsidiaries and attributable to the Bank (31 December 2017: RMB549 million).

38 NON-CONTROLLING INTERESTS

As at 31 December 2018, the non-controlling interests of the subsidiaries were RMB10,927 million (31 December 2017: RMB10,842 million).

39 DIVIDENDS

Dividends for Ordinary Shares

The Board of Directors approved the profit distribution plan for 2018 in the Meeting held on 29 March 2019. The cash dividends declared was RMB3.45 (before tax) for every 10 shares, amounting to a total dividend of RMB15,105 million, while it is still subject to shareholders’ approval.

The shareholders approved the cash dividend distribution plan for the second half of 2017 and the capital reserve conversion plan at the Annual General Meeting on 21 June 2018. The cash dividend declared was RMB 0.90 (before tax) for every 10 shares, amounting to a total dividend of RMB 3,284 million based on total stock of 36,485 million as at 31 December 2017. And the Bank converted capital reserve to share capital on the basis of 2 shares for every 10 shares to all shareholders, the total number of shares increased accordingly was 7,297 million shares.

The Board of Directors approved the profit distribution plan for the first half of 2017 in the Meeting held on 28 August 2017. The cash dividends declared was RMB1.20 (before tax) for every 10 shares, amounting to a total dividend of RMB4,378 million.

The shareholders approved the cash dividend distribution plan for the second half of 2016 at the Annual General Meeting on 16 June 2017. The cash dividend declared was RMB1.65 (before tax) for every 10 shares, amounting to a total dividend of RMB6,020 million.

The Board of Directors approved the profit distribution plan for the first half of 2016 in the Meeting held on 29 August 2016. The cash dividends declared was RMB1.15 (before tax) for every 10 shares, amounting to a total dividend of RMB4,196 million.

Dividends for Preference Shares

According to the resolution on the distribution of dividends for overseas preference shares passed at the Board of Directors’ meeting held on 30 October 2018, dividend to be distributed amounts to USD 79 million (including tax), calculated at the initial annual payout ratio of 4.95% (after tax) before the first reset date pursuant to the terms and conditions of overseas preference shares. The dividend payment date was 14 December 2018.

According to the resolution on the distribution of dividends for overseas preference shares passed at the Board of Directors’ meeting held on 4 December 2017, dividend to be distributed amounts to USD 79 million (including tax), calculated at the initial annual payout ratio of 4.95% (after tax) before the first reset date pursuant to the terms and conditions of overseas preference shares. The dividend payment date was 14 December 2017.

404 40 INVESTMENT REVALUATION RESERVE AND CASH FLOW HEDGING RESERVE

Group

Investment revaluation reserve and cash flow hedging reserve attributable to equity holders of the Bank in the consolidated statement of financial position:

Investment Cash flow revaluation hedging reserve reserve Total

As at 1 January 2017 (1,834) (721) (2,555) Changes in amount for the year (2,923) 718 (2,205)

As at 31 December 2017 (4,757) (3) (4,760) Changes in accounting policies 1,489 — 1,489

As at 1 January 2018 (3,268) (3) (3,271) Changes in amount for the year 4,401 26 4,427

As at 31 December 2018 1,133 23 1,156

Bank

Investment revaluation reserve and cash flow hedging reserve in the statement of financial position:

Investment Cash flow revaluation hedging reserve reserve Total

As at 1 January 2017 (1,866) (721) (2,587) Changes in amount for the year (2,965) 718 (2,247)

As at 31 December 2017 (4,831) (3) (4,834) Changes in accounting policies 1,552 — 1,552

As at 1 January 2018 (3,279) (3) (3,282) Changes in amount for the year 4,564 26 4,590

As at 31 December 2018 1,285 23 1,308

405 41 BANK STATEMENT OF CHANGES IN EQUITY

Reserves

Other Investment Cash flow Share equity Capital Surplus General revaluation Exchange hedging Retained capital instrument reserve reserve reserve reserve reserve reserve Subtotal earnings Total

At 1 January 2017 36,485 9,892 64,447 30,052 71,982 (1,866) 49 (721) 163,943 126,500 336,820

Net profit — — — — — — — — — 48,619 48,619 Other comprehensive income, net of tax — — — — — (2,965) (81) 718 (2,328) — (2,328)

Total comprehensive income — — — — — (2,965) (81) 718 (2,328) 48,619 46,291

Appropriation to surplus reserve — — — 4,862 — — — — 4,862 (4,862) — Appropriation to general reserve — — — — 1,147 — — — 1,147 (1,147) — Cash dividends — — — — — — — — — (10,921) (10,921)

At 31 December 2017 36,485 9,892 64,447 34,914 73,129 (4,831) (32) (3) 167,624 158,189 372,190

Changes in accounting policies — — — — — 1,552 — — 1,552 (11,436) (9,884) At 1 January 2018 36,485 9,892 64,447 34,914 73,129 (3,279) (32) (3) 169,176 146,753 362,306

Net profit — — — — — — — — — 49,973 49,973 Other comprehensive income, net of tax — — — — — 4,564 66 26 4,656 — 4,656

Total comprehensive income — — — — — 4,564 66 26 4,656 49,973 54,629

Appropriation to surplus reserve — — — 4,997 — — — — 4,997 (4,997) — Cash dividends — — — — — — — — — (3,834) (3,834) Ordinary shares converted from capital reserve 7,297 — (7,297) — — — — — (7,297) — —

At 31 December 2018 43,782 9,892 57,150 39,911 73,129 1,285 34 23 171,532 187,895 413,101

406 42 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(1) Cash and cash equivalents

Cash and cash equivalents in the consolidated statement of cash flows consist of the following:

Group

2018 2017

Cash (Note 16) 6,984 8,080 Surplus deposit reserve with central bank (Note 16) 45,814 25,893 Original maturity within 3 months: — Balances with banks and other financial institutions 40,527 63,116 — Placements with banks and other financial institutions 44,701 12,010

Total 138,026 109,099

(2) Reconciliation of movements of liabilities to cash flows arising from financing activities

Group

Liabilities Equity

Interest payable Debt on debt Non- securities securities Retained controlling issued issued profits interests Total

Notes 33 34(3) 37 38

Balance as at 31 December 2017 501,927 3,789 163,420 10,842 679,978 Changes in accounting policies — — (11,527) (148) (11,675)

Balance as at 1 January 2018 501,927 3,789 151,893 10,694 668,303

Cash flows from financing activities Proceeds from issue of debt securities 1,167,503 — — — 1,167,503 Interests paid on debt securities issued — (19,305) — — (19,305) Repayments of debt securities issued (1,003,023) — — — (1,003,023) Dividends paid — — (3,863) — (3,863) Capital paid by non-controlling parties — — — 181 181

Net cash flows from financing activities 164,480 (19,305) (3,863) 181 141,493

Total liability-related other change 3,950 19,682 — — 23,632 Total equity-related other change — — 45,101 52 45,153

Balance as at 31 December 2018 670,357 4,166 193,131 10,927 878,581

407 42 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)

(2) Reconciliation of movements of liabilities to cash flows arising from financing activities (continued)

Group

Liabilities Equity

Interest payable Debt on debt Non- securities securities Retained controlling issued issued profits interests Total

Notes 33 34(3) 37 38

Balance as at 1 January 2017 398,376 4,190 130,630 9,437 542,633

Cash flows from financing activities Proceeds from issue of debt securities 885,225 — — — 885,225 Interests paid on debt securities issued — (12,282) — — (12,282) Repayments of debt securities issued (788,740) — — — (788,740) Dividends paid — — (10,921) (13) (10,934)

Net cash flows from financing activities 96,485 (12,282) (10,921) (13) 73,269

Total liability-related other change 7,066 11,881 — — 18,947 Total equity-related other change — — 43,711 1,418 45,129

Balance as at 31 December 2017 501,927 3,789 163,420 10,842 679,978

408 43 TRANSFER OF FINANCIAL ASSETS

The Group enters into transactions in the normal course of business by which it transfers recognised financial assets to third parties or to structured entities. In some cases where these transfers may give rise to full or partial derecognition of the financial assets concerned. In other cases where the transferred assets do not qualify for derecognition as the Group has retained substantially all the risks and rewards of these assets, the Group continued to recognise the transferred assets.

Credit asset-backed securities

The Group transfers credit assets to structured entities. After that, the structured entities issue asset-backed securities to investors.

Certain securitisations undertaken by the Group result in the Group derecognising transferred assets in their entirety. This is the case when the Group transfers substantially all of the risks and rewards of ownership of financial assets to an unconsolidated securitisation vehicle and retains a relatively small interest in the vehicle or a servicing arrangement in respect of the transferred financial assets. In 2018, loans with an original carrying amount of RMB8,714 million (2017: RMB27,361 million) have been securitised by the Group, and meanwhile, the Group purchased a certain ratio of the asset-backed securities issued by structured entities. As at 31 December 2018, the carrying amount of prime grade assets that the Group held were RMB3 million (31 December 2017: RMB23 million), and the subordinated grade assets were RMB25 million (31 December 2017: RMB155 million). These assets were classified as financial assets at fair value through profit or loss.

Besides the securitisation transaction above, in 2018, loans with an original carrying amount of RMB9,869 million (2017: RMB9,869 million) have been transferred to securitisation vehicles in which the Group does not retain or transfer substantially all of the risks and rewards. As at 31 December 2018, the carrying amount of assets that the Group continued to recognise was RMB1,038 million (31 December 2017: RMB1,038 million). The carrying amount of continuing involvement assets and liabilities that the Group continued to recognise was RMB1,038 million as at 31 December 2018 (31 December 2017: RMB1,038 million).

409 44 CONTINGENT LIABILITIES AND COMMITMENTS

(1) Credit commitments

Credit commitments take the form of approved loans with signed contracts, credit card limits, financial guarantees and letters of credit. The Group regularly assesses the contingent losses of its credit commitments and makes allowances where necessary.

The contractual amounts of loans and credit card commitments represent the cash outflows should the contracts be fully drawn upon. The amounts of guarantees and letters of credit represent the maximum potential loss that would be recognised if counterparties fail to fully perform as contracted. Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers. The Group expects most acceptances to be settled simultaneously with the reimbursement from the customers.

As the credit facilities may expire without being drawn upon, the contract amounts set out in the following table do not represent expected future cash outflows.

Group Bank

2018 2017 2018 2017

Bank acceptances 518,408 461,630 518,258 461,419 Guarantees 136,864 141,929 136,860 141,925 Letters of credit 113,207 107,523 113,207 107,523 Unused credit card commitments 231,054 100,714 231,054 100,714 Finance lease commitments 3,193 3,160 — — Irrevocable loan commitments — original maturity date within 1 year 726 680 726 680 — original maturity date over 1 year (inclusive) 3,262 3,606 3,262 3,606

Total 1,006,714 819,242 1,003,367 815,867

Group Bank

2018 2017 2018 2017

Credit risk weighted amounts of credit commitments 432,578 323,252 431,464 322,462

The credit risk weighted amounts are the amounts calculated in accordance with the guidelines issued by the CBIRC and are dependent on, among other factors, the credit worthiness of the counterparty and the maturity characteristics. The risk weights used range from 0% to 100%.

(2) Capital commitments

Group Bank

2018 2017 2018 2017

Contracted but not paid for 18,400 19,097 2,157 616 Authorised but not contracted for 12 19 12 13

Total 18,412 19,116 2,169 629

410 44 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

(3) Operating lease commitments

The future minimum lease payments under non-cancellable operating lease of the Group and the Bank are summarised as follows:

Group Bank

2018 2017 2018 2017

Within 1 year 3,245 3,441 2,958 3,342 After 1 year but within 5 years 9,516 8,219 8,968 8,082 After 5 years 1,388 2,343 1,343 2,315

Total 14,149 14,003 13,269 13,739

(4) Assets pledged

Group Bank

2018 2017 2018 2017

Investment securities 55,195 60,100 53,316 60,100 Discounted bills 33,399 46,930 33,399 46,851 Finance lease receivables 15,782 16,067 — — Property and equipment 15,272 15,428 — — Balances with banks and other financial institutions 414 — — — Others 1,844 — 713 —

Total 121,906 138,525 87,428 106,951

As at 31 December 2018, the Group’s pledged assets included discounted bills under repurchase agreements that can be sold or repledged. The fair value of such pledged assets was RMB2,110 million as at 31 December 2018 (31 December 2017: RMB704 million). As at 31 December 2018, there were no pledged assets sold or repledged by the Group (31 December 2017: nil). The Group has an obligation to repurchase these pledged assets on due dates.

(5) Underwriting of securities

Group and Bank

2018 2017

Medium- and short-term finance bills 205,209 465,529

411 44 CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)

(6) Redemption commitments

As an underwriting agent of certificated PRC government bonds, the Bank has the obligation to buy back those bonds sold by it should the holders decide to redeem the bonds early. The redemption price for the bonds at any time before their maturity date is based on the coupon value plus any interest unpaid and accrued up to the redemption date. The amount of redemption obligation, which represents the nominal value of government bonds underwritten and sold by the Bank, but not yet matured as at 31 December 2018 was RMB2,779 million (31 December 2017: RMB4,082 million). The original maturities of the bonds vary from one to five years.

(7) Outstanding litigation

A number of outstanding litigation matters against the Group had arisen in the normal course of its business as at 31 December 2018. With consideration of the professional advice, the Group’s management believes such litigation will not have a significant impact on the Group.

45 CONSOLIDATED STRUCTURED ENTITIES

Structured entities consolidated by the Group include asset management plans and funds issued, managed and/or invested by the Group. The Group controls these entities because the Group has power over, is exposed to, or has rights to, variable returns from its involvement with these entities and has the ability to use its power over these entities to affect the amount of the Group’s returns.

As at 31 December 2018, the total assets of these consolidated structured entities were RMB 303 million (31 December 2017: RMB 4 million). The financial impact of any individual structured entity on the Group’s financial performance is not significant.

46 INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES

(1) Structured entities sponsored by third party institutions in which the Group holds an interest.

The Group holds an interest in some structured entities sponsored by third party institutions through investments in the notes issued by these structured entities. Such structured entities include specialised asset management plans, trust beneficiary plans and asset-backed financings and the Group does not consolidate these structured entities. The nature and purpose of these structured entities are to generate fees from managing assets on behalf of investors including the Group and are financed through the issue of investment products to investors.

The following table sets out an analysis of the carrying amounts of interests held by the Group as at 31 December in the structured entities sponsored by third party institutions:

2018

Carrying Maximum amount exposure

Specialised asset management plans 306,020 306,020 Wealth management products 58,871 58,871 Trust beneficiary plans 111,062 111,062 Asset-backed financings 141,724 141,724

Total 617,677 617,677

412 46 INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES (CONTINUED)

(1) Structured entities sponsored by third party institutions in which the Group holds an interest. (continued)

2017

Carrying Maximum amount exposure

Specialised asset management plans 668,706 668,706 Trust beneficiary plans 76,339 76,339 Asset-backed financings 39,491 39,491

Total 784,536 784,536

The following table sets out an analysis of the line items in the consolidated statement of financial position as at 31 December in which assets are recognised relating to the Group’s interests in structured entities sponsored by third parties:

2018

Financial assets Financial assets at fair value at fair value Financial assets through other through measured at comprehensive profit or loss amortised cost income

Specialised asset management plans 160,391 145,629 — Wealth management products 58,871 — — Trust beneficiary plans — 111,062 — Asset-backed financings 4,864 6,695 130,165

Total 224,126 263,386 130,165

2017

Available- Financial for-sale assets held Loans and financial under resale receivables assets agreements

Specialised asset management plans 668,706 — — Trust beneficiary plans 75,939 — 400 Asset-backed financings 20,620 18,871 —

Total 765,265 18,871 400

The maximum exposures to loss in the above specialised asset management plans, wealth management products, trust beneficiary plans and asset-backed financings are the amortised cost or fair value of the assets held by the Group at the reporting date in accordance with the line items of these assets recognised in the statement of financial positions.

413 46 INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES (CONTINUED)

(2) Structured entities sponsored by the Group which the Group does not consolidate but holds an interest.

The types of unconsolidated structured entities sponsored by the Group include non-principal-guaranteed wealth management products and investment funds. The nature and purpose of these structured entities are to generate fees from managing assets on behalf of investors. These structured entities are financed through the issue of notes to investors. Interest held by the Group includes investments in notes issued by these structured entities and fees charged by providing management services. As at 31 December 2018, the carrying amounts of the investments in the notes issued by these structured entities and management fee receivables being recognised were not material in the consolidated statement of financial positions.

As at 31 December 2018, the amount of assets held by the unconsolidated non-principal-guaranteed wealth management products and investment funds, which are sponsored by the Group, was RMB850,704 million and RMB277,848 million respectively (31 December 2017: RMB813,838 million and RMB371,326 million).

(3) Structured entities sponsored by the Group during the year which the Group does not consolidate and holds an interest at 31 December 2018.

During the year of 2018, the amount of fee and commission income received from the above mentioned structured entities by the Group was RMB5,708 million (for the year ended 31 December 2017: RMB10,327 million).

The aggregated amount of the non-principal-guaranteed wealth management products sponsored and issued by the Group after 1 January 2018 but matured before 31 December 2018 was RMB812,360 million (for the year ended 31 December 2017: RMB1,487,827 million).

47 FIDUCIARY ACTIVITIES

The Group commonly acts as a trustee, or in other fiduciary capacities, that result in its holding or managing assets on behalf of individuals, trusts and other institutions. These assets and any gains or losses arising thereon are not included in these financial statements as they are not the Group’s assets.

The Group’s balances of investment fund custodian operations were RMB527,521 million as at 31 December 2018 (31 December 2017: RMB344,111 million). The Group’s balances of pensions custodian operations were RMB243,990 million as at 31 December 2018 (31 December 2017: RMB85,034 million). The Group’s balances of credit assets entrusted management were RMB8,062 million as at 31 December 2018 (31 December 2017: RMB26,106 million). And the Group’s balances of entrusted loans were RMB281,073 million as at 31 December 2018 (31 December 2017: RMB384,592 million).

48 RELATED PARTY TRANSACTIONS

(1) Related parties

(i) Related parties of the Group refer to entities controlled, or jointly controlled by or under significant influence of the Group; entities that control, jointly control or have significant influence over the Group; or entities with which the Group is under control, or joint control of another party. Related parties can be individuals or enterprises. Related parties that have significant influence on the Group include: members of the Board of Directors, the Board of Supervisors and senior management, and close family members of such individuals; entities (and their subsidiaries) controlled or jointly controlled by members of the Board of Directors, the Board of Supervisors and senior management, and close family members of such individuals; major shareholders with the power to influence the Bank’s operating or financial policies, and entities controlled or jointly controlled by these major shareholders.

414 48 RELATED PARTY TRANSACTIONS (CONTINUED)

(1) Related parties (continued)

(ii) The Bank’s main shareholders

No. of Shares Proportion of the Bank of the Bank Registered Registered held by the held by the Legal Company name location capital Company Company(%) Business Legal form representative

(share) (Note a) (Note b)

Anbang Life Insurance Inc. Beijing RMB30,790 million 7,352,284,689 16.79 Insurance business Joint stock limited He Xiaofeng company Anbang Property Insurance Inc. Shenzhen RMB37,000 million 457,930,200 1.05 Insurance business Joint stock limited He Xiaofeng company Huaxia Life Insurance Co., Ltd. Tianjin RMB15,300 million 1,375,763,341 3.14 Insurance business Joint stock limited Li Fei company Orient Group Incorporation Heilongjiang RMB3,715 million 1,280,117,123 2.92 Wholesaling Joint stock limited Sun Mingtao company China Oceanwide Holdings Group Beijing RMB20,000 million 2,019,182,618 4.61 Commercial Limited company Lu Zhiqiang Co., Ltd. service Oceanwide International Equity British Virgin USD0.05 million 604,300,950 1.38 Investment holding Limited company (Note c) Investment Limited Islands China Oceanwide International Hong Kong HKD1,548 million 8,236,920 0.02 Investment holding Limited company (Note c) Investment Company Limited New Hope Liuhe Investment Co., Ltd. Lhasa RMB577 million 1,828,327,362 4.18 Commercial Limited company Wang Pusong service South Hope Industrial Co., Ltd. Lhasa RMB1,034 million 102,387,827 0.23 Retailing Limited company Li Jianxiong Shanghai Giant Lifetech Co., Ltd. Shanghai RMB245 million 1,379,679,587 3.15 Retailing Limited company Wei Wei China Shipowners Mutual Assurance Beijing RMB0.10 million 1,314,284,476 3.00 Insurance business National social Song Chunfeng Association groups Tongfang Guoxin Investment Chongqing RMB2,574 million 737,918,456 1.69 Capital market Limited company Liu Qinqin Co., Ltd. service Chongqing Guotou Equity Investment Chongqing RMB500 million 462,141,259 1.06 Commercial Limited company Yu Xiaohua Management Co., Ltd. service Chongqing International Trust Chongqing RMB15,000 million 128,354,061 0.29 Trust business Joint stock limited Weng Zhenjie Company Limited company Good First Group Co., Ltd. Shanghai RMB133 million 594,300,026 1.36 Research and Limited company Wu Di experimental development

415 48 RELATED PARTY TRANSACTIONS (CONTINUED)

(1) Related parties (continued)

a As at 31 December 2018, proportion of ownership interest held by Anbang Life Insurance Inc. was 16.79% (31 December 2017: 6.50%), Anbang Property Insurance Inc. was 1.05% (31 December 2017: 5.61%), Huaxia Life Insurance Co., Ltd. was 3.14% (31 December 2017: 4.39%), China Shipowners Mutual Assurance Association was 3.00% (31 December 2017: 2.98%), Tongfang Guoxin Investment Co., Ltd. was 1.69% (31 December 2017: 1.37%), Chongqing International Trust Company Limited and Good First Group Co., Ltd. respectively held 0.29% and 1.36% of the ownership interest (31 December 2017: 0.59% and 1.47% respectively), other proportions of ownership interest held by the above major shareholders remain the same as proportions on 31 December 2017.

At 26 September 2018, Anbang Property Insurance Inc. signed an agreement to transfer its 457,930,200 H shares to Anbang Life Insurance Inc.. The share transfer procedures have not been completed by 31 December 2018.

b Particulars of principal operations:

Anbang Life Insurance Inc.: Various life insurance businesses such as life insurance, health insurance and accidental injury insurance, reinsurance business of the above insurance businesses, insurance fund application business permitted under the PRC laws and regulations, and other businesses approved by the Former CIRC.

Huaxia Life Insurance Co., Ltd.: Various life insurance businesses such as life insurance, health insurance and accidental injury insurance businesses, related reinsurance businesses of the above insurances, funds application businesses permitted under the PRC laws and regulations, and other businesses approved by the Former CIRC.

Orient Group Incorporation: Investments in modern agriculture and healthy food industry, new urbanisation and development, financial industry and ports.

China Oceanwide Holdings Group Co., Ltd.: Finance, real property and investment management.

New Hope Liuhe Investment Co., Ltd.: Venture capital, investment management, finance consultancy, wealth management advisory, corporate reorganisation consultancy, market research, credit investigation, technology development and transfer, technology consultancy services, etc.

South Hope Industrial Co., Ltd.: Research and development, wholesale and retail of feeds, electronic products, hardware and electrical appliances, daily sundry goods, textiles, office equipment (excluding colour copier), building materials (excluding hazardous chemicals and wood materials), agricultural by-products and special products (excluding products specified by the State), chemical products (excluding hazardous chemicals), mechanical equipment, investment and consultancy services (excluding intermediary services).

Shanghai Giant Lifetech Co., Ltd.: Manufacturing and sales of food (through its subsidiaries), sales of cosmetics, cleaning products, healthcare equipment and kitchenware, technical development, consultancy, services and transfer in healthcare food aspect, back-to-back wholesale of prepackaged food (excluding cooked or braised and refrigerated or frozen food), investment management, asset management, investment consultancy, business information consultancy and business management consultancy.

China Shipowners Mutual Assurance Association: Marine mutual assurance, business training, marine information exchange, international cooperation and consultancy service.

416 48 RELATED PARTY TRANSACTIONS (CONTINUED)

(1) Related parties (continued)

b Particulars of principal operations: (continued)

Tongfang Guoxin Investment Co., Ltd.: Making investments with its own fund (accepting public deposits or accepting public deposits in any disguised form, granting loans and conducting securities, futures and other financial business are not allowed); providing its associated companies with consultancy services, including market information, in respect of markets in which they invested; providing planning and consultancy services in relation to corporate reorganisation, merger and acquisition; and providing corporate management services. (Businesses that require pre-approvals according to laws shall only be conducted after obtaining approvals from the relevant authorities).

Good First Group Co., Ltd.: Research, development and sale of high-tech products; industrial investment; investments in the education, agriculture, secondary industry and entertainment industry and healthcare products; sale of photographic equipment and new construction materials; wholesale and retail of chemicals (excluding hazardous chemicals and chemicals subject to supervision and control), textiles, hardware and electrical appliances, commodities, metal materials, construction materials, automobiles (excluding passenger cars) and parts, general machinery, electronic products and telecommunication devices and mineral products as approved by the country.

c The Oceanwide International Equity Investment Limited and China Oceanwide International Investment Company Limited are registered overseas, both the above companies are ultimately controlled by Lu Zhiqiang.

The information of registered capital of the related parties as at 31 December is as below:

Company name 2018 2017

Anbang Life Insurance Inc. RMB30,790 million RMB30,790 million Anbang Property Insurance Inc. RMB37,000 million RMB37,000 million Huaxia Life Insurance Co., Ltd. RMB15,300 million RMB15,300 million Orient Group Incorporation RMB3,715 million RMB3,715 million China Oceanwide Holdings Group Co., Ltd. RMB20,000 million RMB20,000 million Oceanwide International Equity Investment Limited USD0.05 million USD0.05 million China Oceanwide International Investment Company Limited HKD1,548 million HKD1,548 million New Hope Liuhe Investment Co., Ltd. RMB577 million RMB577 million South Hope Industrial Co., Ltd. RMB884 million RMB884 million Shanghai Giant Lifetech Co., Ltd. RMB245 million RMB245 million China Shipowners Mutual Assurance Association RMB0.10 million RMB0.10 million Tongfang Guoxin Investment Co., Ltd. RMB2,574 million RMB2,574 million Chongqing Guotou Equity Investment Management Co., Ltd. RMB500 million RMB500 million Chongqing International Trust Company Limited RMB15,000 million RMB15,000 million Good First Group Co., Ltd. RMB133 million RMB133 million

(iii) The detailed information of the Bank’s subsidiaries is set out in Note 26.

(2) Related party transactions

(i) Pricing policy

Transactions between the Group and related parties are conducted in the normal course of its business and under normal commercial terms. The pricing policies are no more favourable than those offered to independent third parties.

417 48 RELATED PARTY TRANSACTIONS (CONTINUED)

(2) Related party transactions (continued)

(ii) Loans to related parties

Balances outstanding as at the end of the reporting period:

Types of collateral 2018 2017 Shanghai Zhunji Business Consulting Partnership (LP) Guaranteed 7,536 — Beijing Oceanwide Dongfeng Real Estate Co., Ltd. Collateralised 4,310 — Wuhan Center Building Development Investment Co., Ltd. Guaranteed 3,984 — Orient Group Incorporation Company and its subsidiaries Collateralised 2,604 — Pledged 300 723 Oceanwide Holding Co., Ltd. Guaranteed 2,325 — Chengdu Hengjilong Real Estate Co., Ltd Collateralised 1,503 — Legend Holdings Ltd. Guaranteed 1,202 1,500 China Tonghai International Finance Co., Ltd. Guaranteed 877 — SHR FSST, LLC Collateralised 688 653 Xiamen Jingding Sports Culture Development Co., Ltd. Collateralised 621 — Xiamen Rongyin Co., Ltd. Pledged 488 11 Collateralised 220 — RPFCBIDCO PTY LIMITED Credit 484 — Sichuan Guida Industrial Co., Ltd. Collateralised 451 — Yuanyang Langji Real Estate Co., Ltd. Collateralised 432 — Xiamen Dazu Real Estate Development Co., Ltd. Collateralised 401 — Alxa Fengwei Photoelectric Co., Ltd. Pledged 371 — Guaranteed 148 — Shanghai Jianjiu Biotechnology Co., Ltd. Guaranteed 351 — Xiamen Hongfu Trading Co., Ltd. Guaranteed 265 — Jindi (Group) Co., Ltd. Guaranteed 200 — Sino-Ocean Real Estate (Hong Kong) Holding Limited Guaranteed 191 — Guangxi Tanggui Investment Co., Ltd. Collateralised 189 — Chengdu New Hope Real Estate Co., Ltd. Collateralised 188 — Shanghai Gold Partner Biotechnology Co., Ltd. Guaranteed 150 — Sichuan Te Qu Education Management Co., Ltd. Collateralised 150 — Good First Group Co., Ltd. Pledged 123 — Collateralised — 668 Guaranteed — 177 Inner Mongolia Qinghua Group New Energy Photovoltaic Co., Ltd. Guaranteed 110 — Pledged 60 — Hebei Sulong Photovoltaic Power Generation Co., Ltd. Collateralised 104 104 Xinjiang Oriental Hope Nonferrous Metals Co., Ltd. Pledged 100 — Shanghai Songjiang Water Company Guaranteed 92 90 Tianjin Haihui Real Estate Development Co., Ltd. Collateralised 60 — HopeSenlan Science & Technology Co., Ltd. Guaranteed 30 30 Sichuan Hope Senlan Energy and Chemical Co., Ltd. Guaranteed 30 100 Chongqing Yufu Highway Co., Ltd. Pledged 20 27 Sinopharm Group Co., Ltd. and its subsidiaries Guaranteed Note 5,730 AUSPICIOUS SUCCESS LIMITED Guaranteed Note 784 Xiamen Oita Sports Culture Development Co., Ltd. Collateralised — 650 Minsheng Yanglao Co., Ltd. Guaranteed — 346 Bybo Dental Group and its subsidiaries Guaranteed — 250 Nanjing Iron and Steel Unite Co., Ltd. Pledged Note 97 CUDECO LIMITED Guaranteed — 65 Sichuan Hope Senlan Air Conditioning Manufacturing Co., Ltd. Guaranteed Note 50 Shanxi New Hope Energy Investment Development Co., Ltd. Pledged — 50 Sichuan Meihao Estate Enterprise Marketing & Planning Co., Ltd. Pledged — 43 Sichuan Hope West Construction Co., Ltd. Guaranteed — 20 Individuals Collateralised 14 26 Guaranteed 3 — Total 31,375 12,194

Ratio to similar transactions (%) 1.04 0.45

Note: As at 31 December 2018, these entities were no longer related parties of the Group. 418 48 RELATED PARTY TRANSACTIONS (CONTINUED)

(2) Related party transactions (continued)

(ii) Loans to related parties (continued)

Amount of transactions:

2018 2017

Interest income from loans 557 258

Ratio to similar transactions (%) 0.24 0.11

As at 31 December 2018, none of the above loans were found to be impaired individually (31 December 2017: nil).

(iii) Other transactions with related parties

Balances outstanding as at the end of the reporting period:

2018 2017

Ratio to Ratio to similar similar transactions transactions Balance (%) Balance (%)

Placements with banks and other financial institutions 5,037 2.04 — — Financial assets measured at amortised cost 4,136 0.37 — — Financial assets at fair value through other comprehensive income 1,810 0.39 — — Balances with banks and other financial institutions 401 0.77 — — Financial assets at fair value through profit or loss 78 0.02 70 0.09 Financial assets held under resale agreements 35 0.09 — — Investment securities: — available-for-sale securities — — 1,235 0.33 Long-term receivables — — 416 0.41 Other assets — — 42 0.04 Deposits from customers 10,516 0.12 17,668 0.60 Deposits and placements from banks and other financial institutions 3,397 0.01 212 0.02 Other liabilities — — 48 0.05

419 48 RELATED PARTY TRANSACTIONS (CONTINUED)

(2) Related party transactions (continued)

(iii) Other transactions with related parties (continued)

Amount of transactions for the reporting period:

2018 2017

Ratio to Ratio to similar similar transactions transactions Balance (%) Balance (%)

Interest income 379 0.16 32 0.01 Interest expense 255 0.16 591 0.41 Fee and commission income 88 0.17 352 0.65 Operating expenses 489 1.00 373 0.79

Other related party transactions have no material impact on the Group’s income statement.

Balances of items off the consolidated statement of financial position outstanding as at the end of the reporting period:

2018 2017

Ratio to Ratio to similar similar transactions transactions Balance (%) Balance (%)

Bank acceptances 2,948 0.65 3,849 0.83 Guarantees 3,468 3.03 3,421 2.41 Letters of credit 633 0.56 375 0.35 Unused credit card commitments 12 0.01 — —

Balances of other items outstanding as at the end of the reporting period:

2018 2017

Ratio to Ratio to similar similar transactions transactions Balance (%) Balance (%)

Loans collateralised by related parties 32,676 1.09 11,851 0.43 Discounted bills under resale agreements, issued by related parties 1 — — —

None of the above related party transactions have a material impact on the Group’s profit or loss for the years ended 31 December 2018 and 31 December 2017, and the Group’s financial position as at 31 December 2018 and 31 December 2017.

420 48 RELATED PARTY TRANSACTIONS (CONTINUED)

(2) Related party transactions (continued)

(iv) Transactions with the annuity scheme

Apart from the obligation for defined contributions to the annuity scheme and normal banking transactions, no other significant transactions were conducted between the Group and the annuity scheme for the years ended 31 December 2018 and 31 December 2017.

(v) Transactions with key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the Bank’s activities, directly or indirectly, including directors, supervisors and senior management.

The Bank enters into transactions with key management personnel under normal commercial terms. These include loans and deposits, which are carried out at rates similar to those offered to third parties. Outstanding loans to the key management amounted to RMB5 million as at 31 December 2018 (31 December 2017: RMB6 million), which have been included in the above loans granted to related parties.

Accrued salaries and other short-term benefits for the key management personnel before tax amounted to RMB114 million for the year ended 31 December 2018 (2017: RMB133 million, the related salaries and benefits were restated in accordance with the Supplementary Announcement Regarding the Senior Management’s Emoluments 2017 of China Minsheng Banking Crop., Ltd.). Of which, pre-tax compensations for the Executive Directors, Chairman of the Supervisory Board, Vice Chairman of the Supervisory Board and executive officers included RMB55 million, to be paid in later years, accrued at no less than 50% of the performance-based compensations (2017: RMB49 million and no less than 50% respectively) in accordance with relevant state regulations. The exact amounts of these deferred payments shall be determined at the end of their respective tenure with the Bank based on their performance. If losses are incurred in their tenure and attributable to them, the Bank withholds the right to stop payment and recover the paid amount. The Bank started to subscribe for supplementary pension insurance for the key management personnel from the second half year of 2018, the amount of which totaled to RMB5.51 million in 2018.

The 2018 emoluments before tax of Executive Directors, the Chairman of the Supervisory Board, the Vice Chairman of the Supervisory Board and senior management are pending for the approval of the Compensation and Remuneration Committee of the Board of Directors, the Bank will make further disclosure upon approval. The amount of the emoluments not accrued is not expected to have a significant impact on the Group’s and the Bank’s 2018 financial statements.

(vi) Transactions between the Bank and its subsidiaries

Balances outstanding as at the end of the reporting period:

2018 2017

Balances with banks and other financial institutions — 51 Placements with banks and other financial institutions 17,730 2,500 Loans and advances to customers 3,019 2,504 Other assets 2,199 376 Deposits and placements from banks and other financial institutions 6,689 8,638 Deposits from customers 1,422 497 Other liabilities 1,967 47

421 48 RELATED PARTY TRANSACTIONS (CONTINUED)

(2) Related party transactions (continued)

(vi) Transactions between the Bank and its subsidiaries (continued)

Amount of transactions for the reporting period:

2018 2017

Interest income 876 251 Interest expense 216 182 Fee and commission income 128 286 Operating expenses 348 327

For the year ended 31 December 2018, the transactions between subsidiaries of the Group were mainly inter-bank deposits. As at 31 December 2018, the balance of the above transactions was RMB747 million (31 December 2017: RMB275 million).

The balances and amount with the subsidiary and inter-subsidiaries have been offset in the consolidated financial statements.

49 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value estimates are generally subjective in nature, and are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the valuation date. This level includes listed equity securities and debt instruments on exchanges (e.g. London Stock Exchange, Frankfurt Stock Exchange, New York Stock Exchange) and derivatives traded in stock exchange like stock index futures (based on indexes including Nasdaq, S&P 500 etc.) etc.

Level 2: inputs other than quoted prices included within Level 1 that are observable for assets or liabilities, either directly or indirectly. A majority of the debt securities classified as level 2 are RMB bonds. The fair value of these bonds are determined based on the valuation results provided by China Central Depository Trust & Clearing Co., Ltd., which are determined based on a valuation technique for which all significant inputs are observable market data. This level also includes a majority of OTC derivative contracts, trading loans and issued structured debt instruments. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. Input parameters like China Bond interbank yield curves, LIBOR yield curves or counterparty credit risk are sourced from Bloomberg and Reuters.

Level 3: inputs for assets or liabilities are unobservable. This level includes equity investments and debt instruments with one or more than one significant unobservable component. These financial instruments are valued by using cash flow discount model. The model incorporates various non-observable assumptions such as discount rate and market price volatilities.

As at 31 December 2018, the carrying amount of financial instrument valued with significant unobservable inputs were immaterial, and the effects of changes in significant unobservable assumptions to reasonably alternative unobservable assumptions were also immaterial.

This hierarchy requires the use of observable open market data wherever possible. The Group tries it best to consider relevant and observable market prices in valuations.

422 49 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(1) Financial instruments recorded at fair value

The following tables show an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

Group

2018

Level 1 Level 2 Level 3 Total

Assets Financial assets which are measured at fair value on a recurring basis: Financial assets at fair value through profit or loss Debt securities 29,022 59,963 2,486 91,471 Equity investments 8,225 520 4,756 13,501 Investment funds 56,859 — — 56,859 Specialised asset management plans — 160,361 30 160,391 Wealth management products — 58,871 — 58,871

Financial assets at fair value through other comprehensive income Debt securities 62,527 394,860 3,681 461,068 Equity investments — — 625 625

Loans and advances to customers designated at fair value through other comprehensive income — 98,311 — 98,311

Derivative financial assets Interest rate contracts — 1,807 — 1,807 Exchange rate contracts — 16,606 — 16,606 Others — 14,699 — 14,699

Total 156,633 805,998 11,578 974,209

Liabilities Financial liabilities which are measured at fair value on a recurring basis: Derivative financial liabilities Interest rate contracts — (461) — (461) Exchange rate contracts — (15,600) — (15,600) Others — (1,939) — (1,939) Financial liabilities at fair value through profit or loss (121) (866) — (987)

Total (121) (18,866) — (18,987)

423 49 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(1) Financial instruments recorded at fair value (continued)

Group (continued)

2017

Level 1 Level 2 Level 3 Total

Assets Financial assets which are measured at fair value on a recurring basis: Financial assets held for trading purpose Debt securities 23,076 39,213 — 62,289 Equity investments 532 — 531 1,063 Investment funds 1,314 — — 1,314

Financial assets designated at fair value through profit or loss Debt securities 251 6,952 72 7,275 Investment funds 2,432 — 228 2,660

Derivative financial assets Interest rate contracts — 1,050 — 1,050 Exchange rate contracts — 11,298 — 11,298 Others 26 6,333 27 6,386

Available-for-sale financial assets Debt securities 59,740 262,203 56 321,999 Equity investments 1,067 358 4,061 5,486 Investment funds 51,252 — — 51,252

Total 139,690 327,407 4,975 472,072

Liabilities Financial liabilities which are measured at fair value on a recurring basis: Derivative financial liabilities Interest rate contracts — (315) — (315) Exchange rate contracts — (16,321) — (16,321) Others (18) (1,422) — (1,440) Financial liabilities at fair value through profit or loss (777) (2,596) — (3,373)

Total (795) (20,654) — (21,449)

424 49 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(1) Financial instruments recorded at fair value (continued)

Bank

2018

Level 1 Level 2 Level 3 Total

Assets Financial assets which are measured at fair value on a recurring basis: Financial assets at fair value through profit or loss Debt securities 29,022 59,963 2,388 91,373 Equity investments 7,765 407 3,906 12,078 Investment funds 55,618 — — 55,618 Specialised asset management plans — 160,361 — 160,361 Wealth management products — 58,871 — 58,871

Financial assets at fair value through other comprehensive income Debt securities 60,885 391,952 3,442 456,279 Equity investments — — 625 625

Loans and advances to customers designated at fair value through other comprehensive income — 97,904 — 97,904

Derivative financial assets Interest rate contracts — 1,702 — 1,702 Exchange rate contracts — 16,606 — 16,606 Others — 14,699 — 14,699

Total 153,290 802,465 10,361 966,116

Liabilities Financial liabilities which are measured at fair value on a recurring basis: Derivative financial liabilities Interest rate contracts — (456) — (456) Exchange rate contracts — (15,600) — (15,600) Others — (1,939) — (1,939) Financial liabilities at fair value through profit or loss (7) (866) — (873)

Total (7) (18,861) — (18,868)

425 49 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(1) Financial instruments recorded at fair value (continued)

Bank (continued)

2017

Level 1 Level 2 Level 3 Total

Assets Financial assets which are measured at fair value on a recurring basis: Financial assets held for trading purpose Debt securities 22,579 39,213 — 61,792 Equity investments 529 — — 529 Investment funds — — — —

Financial assets designated at fair value through profit or loss Debt securities 251 6,953 — 7,204 Investment funds 2,432 — — 2,432

Derivative financial assets Interest rate contracts — 1,039 — 1,039 Exchange rate contracts — 11,298 — 11,298 Others 26 6,333 — 6,359

Available-for-sale financial assets Debt securities 58,828 262,080 56 320,964 Equity investments 611 358 4,061 5,030 Investment funds 51,196 — — 51,196

Total 136,452 327,274 4,117 467,843

Liabilities Financial liabilities which are measured at fair value on a recurring basis: Derivative financial liabilities Interest rate contracts — (296) — (296) Exchange rate contracts — (16,321) — (16,321) Others (18) (1,422) — (1,440) Financial liabilities at fair value through profit or loss (777) (2,596) — (3,373)

Total (795) (20,635) — (21,430)

426 49 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(2) Movement in level 3 financial instruments measured at fair value

The following table shows a reconciliation of the opening and closing balance of level 3 financial assets and liabilities which are recorded at fair value and the movement during the year:

Group

2018

Financial assets at fair value Financial assets at fair Derivative through value through financial profit or other comprehensive assets loss income

Debt Equity securities securities Total assets

At 1 January 27 5,607 178 155 5,967 — in profit or loss — (2,326) — — (2,326) — in other comprehensive income — — 266 — 266 Purchase — 3,103 2,578 500 6,181 Addition — 915 659 — 1,574 Settlement (27) (27) — (30) (84)

At 31 December — 7,272 3,681 625 11,578

Total gains for the year included in profit or loss for assets and liabilities held at the end of the reporting period — (1,361) 69 — (1,292)

2017

Financial Financial assets assets designated Derivative held for at fair value financial trading through Available-for-sale assets purpose profit or loss securities

Debt Equity securities securities Total assets

At 1 January 84 472 — 14 3,911 4,481 — in profit or loss — (28) 20 19 — 11 — in other comprehensive income — — — (22) (16) (38) Purchase 27 87 71 — 769 954 Addition — — 209 45 — 254 Settlement (84) — — — (603) (687)

At 31 December 27 531 300 56 4,061 4,975

Total gains for the year included in profit or loss for assets and liabilities held at the end of the reporting period — (28) 20 27 — 19

427 49 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(2) Movement in level 3 financial instruments measured at fair value (continued)

Bank

2018

Financial assets at fair value Financial assets at fair Derivative through value through financial profit other comprehensive assets or loss income

Debt Equity securities securities Total assets

At 1 January — 4,964 178 155 5,297 — in profit or loss — (1,792) — — (1,792) — in other comprehensive income — — 27 — 27 Purchase — 2,207 2,578 500 5,285 Addition — 915 659 — 1,574 Settlement — — — (30) (30)

At 31 December — 6,294 3,442 625 10,361

Total gains for the year included in profit or loss for assets and liabilities held at the end of the reporting period — (1,354) 69 — (1,285)

2017

Financial assets Financial designated assets at fair value Derivative held for through financial trading profit Available-for-sale assets purpose or loss securities

Debt Equity securities securities Total assets

At 1 January — — — 14 3,308 3,322 — in profit or loss — — — 19 — 19 — in other comprehensive income — — — (22) (16) (38) Purchase — — — — 769 769 Addition — — — 45 — 45

At 31 December — — — 56 4,061 4,117

Total gains for the year included in profit or loss for assets and liabilities held at the end of the reporting period — — — 27 — 27

428 49 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(3) Transfers among levels

During the year, the transfers among level 1 and level 2 of the fair value hierarchy for financial assets and liabilities of the Group were immaterial.

(4) Fair value of financial assets and liabilities not carried at fair value

a Cash and balances with central bank, balances with banks and other financial institutions, placements with banks and other financial institutions, long-term receivables, deposits and placements from banks and other financial institutions, borrowings from banks and other financial institutions, and financial assets held under resale agreements and sold under repurchase agreements

Given that these financial assets and financial liabilities mainly mature within a year or adopt floating interest rates, their book values approximate their fair values.

b Loans and advances to customers measured at amortised, financial assets measured at amortised cost other than bonds and investment securities — loans and receivables

Loans and advances to customers measured at amortised, financial assets measured at amortised cost other than bonds, and investment securities — loans and receivables are recorded net of allowance for impairment losses. Their estimated fair value represents the amount of estimated future cash flows expected to be received, discounted at current market rates.

c Financial assets measured at amortised cost-bonds, held-to-maturity securities and available-for-sale equity investments which measured in cost

The fair value for financial assets measured at amortised cost-bonds, held-to-maturity assets and available-for-sale equity investments which measured in cost is based on “bid” market prices or brokers’/dealers’ price quotations. If relevant market information is not available, the fair value is based on quote price of security products with similar characteristics such as credit risk, materiality and yield.

d Deposits from customers

The fair value of checking, savings and short-term money market accounts is the amount payable on demand at the end of the reporting period. The fair value of fixed interest-bearing deposits without quoted market prices are estimated based on discounted cash flows using interest rates for new deposits with similar remaining maturities.

429 49 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

(4) Fair value of financial assets and liabilities not carried at fair value (continued)

e Debt securities issued

Fair values of debt securities issued are based on quoted market prices. For debt securities where quoted market prices are not available, a discounted cash flow model is used to calculate their fair value using current market rates appropriate for debt securities with similar remaining maturities.

The following table summarises the carrying amounts, the fair value and the analysis by level of the fair value hierarchy of held-to-maturity investments, loans and receivables, loans and advances to customers, debt securities issued and deposits from customers:

2018 2017

Carrying Carrying Group amount Fair value Level 1 Level 2 Level 3 amount Fair value Level 1 Level 2 Level 3

Financial assets Financial assets measured at amortised cost 1,127,231 1,112,704 6,879 1,105,825 — — — — — — Available-for-sale equity investments — — — — — 152 152 — — 152 Loans and receivables — — — — — 974,163 971,020 — 971,020 — Loans and advances to customers 2,909,961 3,318,785 — 3,318,785 — 2,729,788 3,144,570 — 3,144,570 — Held-to-maturity investments — — — — — 708,244 679,333 — 679,333 —

Total 4,037,192 4,431,489 6,879 4,424,610 — 4,412,347 4,795,075 — 4,794,923 152

Financial liabilities Deposits from customers 3,194,441 3,223,287 — 3,223,287 — 2,966,311 2,982,404 — 2,982,404 — Debt securities issued 674,523 663,187 — 663,187 — 501,927 497,864 — 497,864 —

Total 3,868,964 3,886,474 — 3,886,474 — 3,468,238 3,480,268 — 3,480,268 —

2018 2017

Carrying Carrying Bank amount Fair value Level 1 Level 2 Level 3 amount Fair value Level 1 Level 2 Level 3

Financial assets Financial assets measured at amortised cost 1,119,177 1,104,523 5,894 1,098,629 — — — — — — Available-for-sale equity investments — — — — — 125 125 — — 125 Loans and receivables — — — — — 967,600 964,457 — 964,457 — Loans and advances to customers 2,895,242 3,300,167 — 3,300,167 — 2,714,957 3,126,373 — 3,126,373 — Held-to-maturity investments — — — — — 708,244 679,333 — 679,333 —

Total 4,014,419 4,404,690 5,894 4,398,796 — 4,390,926 4,770,288 — 4,770,163 125

Financial liabilities Deposits from customers 3,167,112 3,196,035 — 3,196,035 — 2,936,021 2,954,654 — 2,954,654 — Debt securities issued 669,396 658,146 — 658,146 — 500,929 496,867 — 496,867 —

Total 3,836,508 3,854,181 — 3,854,181 — 3,436,950 3,451,521 — 3,451,521 —

430 50 BANK STATEMENT OF FINANCIAL POSITION

2018 2017

ASSETS

Cash and balances with central bank 385,239 438,071 Balances with banks and other financial institutions 38,688 50,149 Precious metals 7,205 20,836 Positive fair value of derivatives 33,007 18,696 Placements with banks and other financial institutions 264,255 145,705 Financial assets held under resale agreements 35,284 47,855 Loans and advances to customers 2,993,146 2,714,957 Financial investments: — Financial assets at fair value through profit or loss 378,301 71,957 — Financial assets at fair value through other comprehensive income 456,904 — — Financial assets measured at amortised cost 1,119,177 — — Available-for-sale securities — 377,315 — Held-to-maturity securities — 708,244 — Loans and receivables — 967,600 Property and equipment 22,366 21,559 Deferred income tax assets 29,500 28,205 Investment in subsidiaries 6,396 5,385 Other assets 36,744 77,362

Total assets 5,806,212 5,693,896

LIABILITIES

Borrowings from central bank 303,837 334,500 Deposits from customers 3,167,112 2,936,021 Deposits and placements from banks and other financial institutions 1,098,044 1,324,632 Financial liabilities at fair value through profit or loss 873 3,373 Negative fair value of derivatives 17,995 18,057 Financial assets sold under repurchase agreements 88,628 107,390 Provisions 1,370 808 Debt securities issued 669,396 500,929 Current income tax liabilities 8,578 11,402 Other liabilities 37,278 84,594

Total liabilities 5,393,111 5,321,706

431 50 BANK STATEMENT OF FINANCIAL POSITION (CONTINUED)

2018 2017

EQUITY Share capital 43,782 36,485 Other equity instrument Including: Preference shares 9,892 9,892 Reserves: Capital reserve 57,150 64,447 Surplus reserve 39,911 34,914 General reserve 73,129 73,129 Other reserves 1,342 (4,866) Retained earnings 187,895 158,189

Total equity 413,101 372,190

Total liabilities and equity 5,806,212 5,693,896

51 SUBSEQUENT EVENTS

Up to the approval date of the financial statements, other than the dividends distribution plan set out in Note 39, the Group had no material subsequent events for disclosure.

52 COMPARATIVE FIGURES

For financial statements disclosure purpose, the Group made reclassification adjustments to some comparative figures.

432 Unaudited Supplementary Information of Financial Statements

1 Liquidity coverage ratio (%)

As at Average for As at Average for 31 December the year of 31 December the year of 2018 2018 2017 2017

Liquidity coverage ratio (RMB and foreign currency) 121.13% 100.91% 95.46% 87.17%

The above liquidity coverage ratio is calculated in accordance with the formula promulgated by the CBIRC and based on the financial information prepared in accordance with PRC GAAP.

Pursuant to the Administrative Measures on Liquidity risk of Commercial Banks, the liquidity coverage ratio of commercial banks shall reach 100% by the end of 2018.

2 Currency concentrations

2018

USD HKD Others Total

Spot assets 407,397 49,926 54,116 511,439 Spot liabilities (364,100) (26,233) (26,143) (416,476) Forward purchases 831,401 19,429 96,399 947,229 Forward sales (808,991) (40,017) (164,803) (1,013,811)

Net long/(short) position* 65,707 3,105 (40,431) 28,381

433 2 Currency concentrations (continued)

2017

USD HKD Others Total

Spot assets 386,901 55,112 63,665 505,678 Spot liabilities (395,750) (33,673) (24,651) (454,074) Forward purchases 668,925 13,354 62,194 744,473 Forward sales (586,963) (26,937) (113,783) (727,683)

Net long/(short) position* 73,113 7,856 (12,575) 68,394

* The net option position is calculated using the delta equivalent approach as required by the Hong Kong Monetary Authority.

The Group has no structural position in the reported periods.

3 Loans and advances to customers

(1) Impaired loans by geographical area

Group

2018

Northern Eastern Southern Other China China China Locations Total

Impaired loans 14,834 9,156 5,900 25,564 55,454 Allowance for impairment losses 7,293 5,247 3,200 15,333 31,073

2017

Northern Eastern Southern Other China China China Locations Total

Impaired loans 19,843 11,053 4,433 12,560 47,889 Allowance for impairment losses — Individual assessment 5,615 3,582 1,295 3,183 13,675 — Collective assessment 7,010 2,828 1,364 3,535 14,737

434 3 Loans and advances to customers (continued)

(1) Impaired loans by geographical area (continued)

Bank

2018

Northern Eastern Southern Other China China China Locations Total

Impaired loans 14,823 9,016 5,844 25,262 54,945 Allowance for impairment losses 7,282 5,147 3,174 15,132 30,735

2017

Northern Eastern Southern Other China China China Locations Total

Impaired loans 19,830 10,815 4,365 12,348 47,358 Allowance for impairment losses — Individual assessment 5,615 3,582 1,295 3,183 13,675 — Collective assessment 7,005 2,670 1,331 3,397 14,403

(2) Loans overdue for more than 3 months by geographical area

Group

2018

Northern Eastern Southern Other China China China Locations Total

Overdue loans 14,072 8,679 5,137 24,172 52,060 Allowance for impairment losses 6,879 5,043 2,947 14,713 29,582

2017

Northern Eastern Southern Other China China China Locations Total

Overdue loans 27,702 15,002 5,560 16,798 65,062 Allowance for impairment losses — Individual assessment 1,470 1,634 620 1,164 4,888 — Collective assessment 7,876 3,315 1,664 4,363 17,218

435 3 Loans and advances to customers (continued)

(2) Loans overdue for more than 3 months by geographical area (continued)

Bank

2018

Northern Eastern Southern Other China China China Locations Total

Overdue loans 14,061 8,569 5,097 23,559 51,286 Allowance for impairment losses 6,868 4,964 2,928 14,465 29,225

2017

Northern Eastern Southern Other China China China Locations Total

Overdue loans 27,688 14,757 5,508 16,384 64,337 Allowance for impairment losses — Individual assessment 1,470 1,473 620 1,164 4,727 — Collective assessment 7,871 3,154 1,629 4,178 16,832

436 4 International claims

2018

Asia pacific excluding mainland North Other China America Europe Locations Total

Banks and other financial institutions 59,547 18,270 15,445 1,748 95,010 Public sector entities 3,505 137 — — 3,642 Others 59,384 24,490 8,021 23,166 115,061

Total 122,436 42,897 23,466 24,914 213,713

2017

Asia pacific excluding mainland North Other China America Europe Locations Total

Banks and other financial institutions 34,794 9,624 4,924 5,182 54,524 Public sector entities 826 130 — — 956 Others 117,807 29,043 6,148 19,715 172,713

Total 153,427 38,797 11,072 24,897 228,193

437

中 國 民 生 銀 行 股 份 有 限 公 司 China Minsheng

中國民生銀行股份有限公司 China Minsheng